What are chart patterns?

Chart patterns are the foundational building blocks of technical analysis. They repeat themselves in the market time and time again and are relatively easy to spot. These basic patterns appear on every timeframe and can, therefore, be used by scalpers, day traders, swing traders, position traders and investors.

What types of stock chart patterns are used in technical analysis?

There are two primary types of stock chart patterns used in technical analysis: continuation patterns and reversal patterns. Continuation patterns occur in the middle of an existing trend, signaling the continuation of a trend even after the pattern completes. Reversal patterns, on the other hand, signal change in the prevailing trend.

Why do traders use chart patterns?

Patterns provide logic to the price action, pointing to both breakouts and reversals. In particular, traders use chart patterns to identify price trends– valuable for forecasting future price behavior to determine profitable entry or exit points. They can be used to analyze all markets, including stocks, forex, cryptocurrencies, and commodities.

What is the most successful chart pattern?

Support and resistance levels are arguably the most popular indicator in technical analysis, as they capture a myriad of specific indicators such as moving averages, Bollinger bands etcetera. It’s important to note, though, that there is not one pattern that is “better” than another.