Chart Patterns & Technical Analysis
Chart Patterns are graphical representations of historical stock prices which help to determine current supply and demand forces in a stock. Chart pattern analysis allows a trader to determine with more accuracy just what the current supply and demand is in a stock. Chart patterns are graphical representations of historical stock prices which form repeating patterns or shapes, and are commonly used in the stock market.
Trading with technical analysis requires correctly identifying chart patterns. Technical analysis is the study of price history to determine future trading opportunities. Price history in the form of a price chart is the visual representation of where prices have been, where buyers and sellers lurk, and often times the trading psychology at work in the market. If human emotion drives buying and selling behavior, then chart patterns can help to determine where such emotions may next surface. Chart patterns are the depiction of trading psychology in motion.
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This page is a starting point for those who are looking to improve their chart pattern recognition and learn more about chart patterns. Short term traders often study chart patterns to gauge supply and demand forces in the stock market. Such forces are the basis for price fluctuations, which enables a trader to profit.
Chart patterns are useful gauges of momentum, support and resistance, and other indications of strength or weakness in a stock. Chart patterns help traders to determine market direction as well as time entries and exits. A trader must be able to identify chart patterns properly. Only then can a trader benefit from chart patterns.
Our Basic Stock Trading Course covers patterns in detail, as well as much more.
We also have an extensive trading glossary of other terms which can help you!
Chart Patterns – Continuation Patterns
Continuation patterns are chart patterns which set up the stock for a follow through move in the direction of the prior trend. Continuation chart patterns include all of the patterns listed below.
- Cup and Handle
- Flag Patterns
- Pennant Patterns
- Triangle Patterns
- Channeling Stock
- Rectangle Pattern
Chart Patterns – Reversal Patterns
Reversal patterns are chart patterns which reverse the trend of a stock once the pattern is confirmed. Reversal patterns include all of the patterns listed below.
- Double Top
- Double Bottom
- Head and Shoulders Top
- Head and Shoulders Bottom
- Wedge Patterns
- Rounded Bottom
- Triple Top
- Triple Bottom