Chart patterns are a type of technical analysis used by traders to identify potential price reversals and trend reversals. Chart patterns are graphical representations of price data that are created by plotting price data points on a chart.
There are many different types of chart patterns, but some of the most common include head and shoulders, double tops/bottoms, and triangles.
Chart patterns can be used to identify potential buying and selling opportunities. For example, if a trader identifies a head and shoulders chart pattern, they may consider selling short once the price breaks below the neckline of the pattern.
Chart patterns can also be used to identify trend reversals. For example, if a trader identifies a double top chart pattern, they may consider buying once the price breaks above the resistance level of the pattern.
Chart patterns should not be used in isolation, but should be used in conjunction with other forms of technical analysis, such as trendlines, moving averages, and oscillators.
Chart patterns can be a valuable tool for traders, but should not be relied on exclusively. Always remember that past performance is not indicative of future results.
