It's
important to know that chart patterns are graphical representations of
historical stock prices which help to determine current supply and
demand
forces for a given stock. Chart pattern analysis allows a
trader
to determine with greater accuracy just what the current supply and
demand
is for a stock. Chart patterns are graphical representations
of historical
stock prices which form repeating patterns or shapes, and are commonly
used in the stock market.
Trading
with technical analysis requires correctly
identifying chart patterns.
Technical analysis (TA) is the study of price history to determine
future
trading opportunities. Price history in the form of a price
chart
is the visual representation of where prices have been, where buyers
and
sellers lurk, and often times the trading psychology at work in the
market.
If human emotion drives buying and selling behavior, then chart
patterns
can help to determine where such emotions may next surface.
Chart
patterns are the depiction of trading psychology in motion.
Short
term traders often study chart patterns to gauge supply and demand
forces
in the stock market. Such forces are the basis for price
fluctuations,
which enables a trader to profit.
Chart
patterns are useful gauges of momentum, support and resistance, and
other
indications of strength or weakness in a stock. Chart
patterns help
traders to determine market direction as well as to time entries and
exits.
A good trader should be able to identify chart patterns
properly.
It takes practice
and diligence to learn to recognize chart patterns
and to make them work for you as a trader.
A careful
study of the chart patterns as presented herein will serve to provide
investors
with some of the basics needed to help begin to recognizing stock
patterns
and trends. With time and experience investors will become increasingly
comfortable working with charts.
