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7 Common Trading Chart Patterns You Need To Know!

The head and shoulders pattern is a conventional chart pattern that occurs as a result of a rapid increase in the price of a stock followed by a long period of price correction. A stock's price rises rapidly, then experiences a long period of price correction. The second peak occurs as a result of a lengthy correction in price following the first peak. After the second peak, the price drops significantly, leading to a nearly inverted head and shoulders pattern. The double top/bottom pattern is a sign that a stock should be sold. The double top and double bottom are two related chart patterns that are characterized by two false breakouts in price. The false breakouts happen when the price of a stock goes to a new high or low and then quickly reverses back to the original price level.

Written by
June 15, 2022

7 Common Trading Chart Patterns You Need To Know!


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Trading stocks can be both exciting and challenging. There are times when you’ll find it difficult to find trading opportunities, while other times the options will seem endless. Every trader needs a strategy to follow, and that’s where technical analysis comes in. For those who aren’t familiar with the world of technical analysis, it’s a set of techniques that market researchers use to analyze the market prices of assets such as stocks, futures and other securities. Technical analysis is used by investors and traders as a way to measure, monitor, and anticipate market trends. If you want to become a more successful trader, learning technical analysis is a great place to start. In this article we’ll explain what technical analysis is, why it’s important and supply you with 7 common trading chart patterns that you need to know!


What Is Technical Analysis?

Technical analysis is the process of analyzing a security or a financial market for clues about its future price movement. This is done by studying the market’s trading history, including the volume and price of the securities and the orderliness of the transactions. In short, technical analysis is a set of techniques that market researchers use to analyze the market prices of assets such as stocks, futures and other securities. Technical analysis is used by investors and traders as a way to measure, monitor, and anticipate market trends.


Why Is Technical Analysis Important?

Technical analysis is important because it enables traders and investors to predict future price movements with more accuracy. By analyzing price charts, patterns, and volumes, traders will have a better chance at making the correct decision when it comes to buying, selling or holding an asset. At the same time, it’s important to remember that technical analysis is not always correct. Even though the majority of traders rely on charts to predict future price movements, nothing is guaranteed. This is because the financial markets are often unpredictable and impulsive. At the end of the day, technical analysis is still a set of guidelines that traders use to inform their decisions.


7 Common Chart Patterns You Need To Know!

Head and Shoulders Pattern - A head-and-shoulders pattern is a common charting pattern that represents a stock at a peak and the likelihood of a subsequent price decline. A head-and-shoulders pattern is formed by two swing highs and a lower high that appears between the two preceding highs. The two highs represent the “heads”, the lower high represents the “shoulder”, and the subsequent decline is an attempt to retrace the “neckline”. Double Top/Bottom Pattern - A double top or bottom pattern appears when a stock price hits a high, retraces and hits a lower high, retraces again and hits a lower low. A double top is formed when the stock price first hits a high, retraces, hits a higher high, retraces again and hits a lower high. A double bottom is formed when the stock price first hits a low, retraces, hits a lower low, retraces again and hits a higher low. Ascending Charts Pattern - An ascending chart pattern is a bullish chart pattern that is created when a security’s open, high, low and close are all rising over time. An ascending chart pattern can be created by almost any type of security, such as stocks, commodities, ETFs, etc. This pattern is often used when traders are expecting the price of a security to rise significantly over a short period of time. Descending Charts Pattern - A descending chart pattern is a bearish chart pattern that is created when a security’s open, high, low and close are all falling over time. A descending chart pattern can be created by almost any type of security, such as stocks, commodities, ETFs, etc. This pattern is often used when traders are expecting the price of a security to fall significantly over a short period of time. Triple Bottom Pattern - A triple bottom chart pattern is similar to the double bottom chart pattern, but with an additional retracement. A triple bottom chart pattern is created when a security’s open, high, low and close are all falling over time. A triple bottom chart pattern is usually viewed as an extremely bullish chart pattern. Conclusion - Trading stocks can be both exciting and challenging. There are times when you'll find it difficult to find trading opportunities, while other times the options will seem endless. Every trader needs a strategy to follow, and that's where technical analysis comes in. For those who aren't familiar with the world of technical analysis, it's a set of techniques that market researchers use to analyze the market prices of assets such as stocks, futures and other securities. Technical analysis is used by investors and traders as a way to measure, monitor, and anticipate market trends. If you want to become a more successful trader, learning technical analysis is a great place to start. In this article we'll explain what technical analysis is, why it's important and supply you with 7 common trading chart patterns that you need to know then Click here.

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