Patterns on a Chart
In prior post I’ve been talking about moving averages, support and resistance, and indicators as tools in technical analysis. The next few post on TA I’d like to talk about chart patterns. Patterns in charts are perhaps the oldest TA, often credited with early Japanese rice traders using candlestick patterns. The human brain is a pattern recognizing machine and particularly notices when something changes from the pattern it’s currently on. The brain loves change!
There are as many chart patterns as there are people to package them up and sell them on the internet. Oh did I mention for only $9.99 you too can have… no I’m just kidding. I won’t give away my secrets that cheap! 
Some of the more well knows patterns are:
- Elliot Wave Theory
- Double Tops and Double Bottoms
- Head And Shoulders
- Falling and Rising Wedges
- Triangles
- Cup and Handle
- Flags and Pennants
I’ll talk about these in more detail this week, but the main point I want to make today is these patterns aren’t just based on cool images, but market psychology. People in mass tend to react in a predicatble way. If you see the path in the chart early then there is potential to make some money, not recognizing what is taking place can get you run over. Even if your fundamentals are correct – mass psychology and can definately over ride pure facts and logic longer than you can stay solvent.
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Related posts:
- Patterns in Charts – Head and Shoulders
- Patterns in Charts – Flags and Pennants
- Patterns in Charts – Double Bottoms
- Using Triangle Patterns For Technical Analysis
- MACD – Moving Average Convergence Divergence
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