Chart patterns are a nifty tool used by traders to help divine the direction of the markets. These patterns are born from the fluctuation of prices over time and can be seen etched onto the charts like a map of the stock market’s twists and turns.
Continuation patterns are those that suggest the present price trend will persist, while reversal patterns signal a change of course. Among the most common continuation patterns are flags, pennants, and triangles, while the head and shoulders, double tops, and double bottoms are well-known reversal patterns.
A canny trader that knows how to read these patterns can use them to help enter or exit a position or when to protect against potential losses by placing a stop-loss order.
Mind you, chart patterns are not a panacea, and they ought to be employed in tandem with other methods of analysis, such as fundamental analysis and the general mood of the market, to make sound trading choices.
Remember all videos and information on this site is only for educational purposes and is not intended as investment advice.
Here is a video that walks you through some if the major patterns.
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