PATTERNS & FORMATIONS
History repeats itself and with financial markets, this repetition leads to recognisable pattern formations. Chart patterns look at the bigger picture and help to identify trading signals or signs of future price movements. A chart pattern or price pattern is a pattern within a chart when prices are graphed. In Equities, CFD’s, Forex and commodity markets trading, chart pattern studies play a large role during technical analysis. When data is plotted there is usually a pattern, which naturally occurs and repeats over a period.
Formations and Patterns fall under two main categories:
A continuation pattern is a pattern identified on a price chart that indicates a pause in a trend. It may indicate that the trend is likely to resume its original direction, once the price breaks out of the pattern.
The reversal pattern marks the dividing line between rising and falling trends.
A reversal pattern is a chart formation that precedes a change in the trend. Most reversal patterns involve the price action of a share breaking out of a certain range and then heading higher or lower – whichever is the reverse of the previous trend.
Patterns assist with the prediction of movement.
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