Chart patterns are used to recognize upcoming market movements based on the current sentiment. Chart patterns are very strong signals and should be taken seriously by every trader.
Simply put, A chart pattern is something that has occured so frequently and almost always had same results - the market becomes very predicatable when these patterns occur on a chart. So much so, that the traders follow these patterns - almost blindly - proving time and time again that these patterns work.
However, identifying these chart patterns are an acquired talent - it takes time to become proficient in identifying a chart pattern - there are some softwares on the web that promise to identify chart patterns.
Some major chart patterns, like ascending triangle, descending triangle and symmetrical triangle - predict a breakout of the market in one direction or the other.
Continuation Patterns
Some chart patterns predit continuation of the existing trend (hence are called continuation patterns)
Reversal Patterns
Some other chart patterns predit the reversal of the existing trend (hence are called reversal patterns)
Using chart patterns in your trading analysis might prove to be profitable.
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