What is Price-Pattern analysis, and how can it help me develop an edge in my trading?
Price-pattern analysis is a widely-used method of evaluating the historical price movements of a market or instrument, helping traders identify certain patterns that can be used to make informed trading decisions.
By understanding the underlying supply and demand forces in the market, traders can gain valuable insight into potential future trends and price movements.
There are many different types of price patterns that traders can look for, each exhibiting its own unique characteristics. Examples of such patterns include head and shoulders, wedges, channels, and flags. The head and shoulders pattern is a bearish reversal pattern that is formed when a peak is followed by a higher peak and then a lower peak, with the middle peak being the highest. This pattern often signifies that the uptrend is reversing and that the security’s price is likely to decline.
The wedge pattern, on the other hand, is a trend continuation pattern that is created when the price moves in a narrowing range. An ascending wedge is considered a bullish pattern, suggesting that the price is most likely to rise, and a descending wedge is seen as a bearish pattern, indicating that the price is likely to fall.
Price-pattern analysis can be a very helpful tool for traders, however, it is essential to remember that no single pattern is perfect and traders should also utilize other forms of analysis, such as fundamental and technical analysis, to confirm their trades. Additionally, traders should pay attention to any news or events that could affect the market, as these could potentially invalidate a pattern.
By taking all of these factors into consideration, traders can maximize their chances of making profitable trades.
In the below series, we’ll explore the top 20 price-patterns – as used by professional traders of all market types, around the world.
We’ll cover each of the below key Price patterns:
- Ascending Triangle
- Bearish Flag
- Bearish Pennant
- Bearish Triangle
- Bullish Flag
- Bullish Pennant
- Bullish Triangle
- Cup and Handle
- Descending Triangle
- Double Bottom
- Double Top Falling
- Wedge
- Head and Shoulders
- Inverted Cup and Handle
- Inverted Head and Shoulders
- Rising Wedge
- Rounded Bottom
- Rounded Top
- Triple Bottom
- Triple Top
