What are chart patterns?
A chart pattern is a shape within a price chart that helps to suggest what prices might do next, based on what they have done in the past. Chart patterns are the basis of technical analysis and require a trader to know exactly what they are looking at, as well as what they are looking for.
What are the uses of chart patterns?
Traders use chart patterns to identify stock price trends when looking for trading opportunities. Some patterns tell traders they should buy, while others tell them when to sell or hold.
How do you read a chart pattern?
Stock chart patterns for traders
It's another to actually know how to read it. As shown in the chart below, stocks that move up over a period of time with a series of higher highs and higher lows are essentially in uptrends; stocks that move down with lower highs and lower lows over a period of time are in downtrends.
How are chart patterns formed?
A chart formation is a pattern created by price data or other metric that a technical trader recognizes from a past analysis. Thus, they can anticipate what the price may do next based on how that pattern played out when it appeared previously.
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