Limbo

Limbo

16-11-2022

12:07

Introduction to classic chart patterns 🧡 Let's dive straight into the thread. The price change of an asset happens due to supply and demand. And as a result, the price starts moving in a specific pattern on a chart. 1/

The chart patterns are tools that traders use to enter and exit a trading position. It’s important to understand how these chart patterns work. In this thread we're going to discuss: -Different types of chart patterns. -And how to trade them? 2/

Classic chart patterns are divided into two categories. -Trend reversal chart patterns -Trend continuation chart patterns 3/

Further, these patterns can be identified as bullish and bearish. A potential buy indication is provided by bullish chart patterns, and a potential sell signal is provided by bearish chart patterns. It depends on the breakout of the pattern. 4/

-Ascending triangles act as a bullish pattern. -They can play both as a reversal and a continuation. 5/

-Descending triangles act as a bearish pattern. -They can play both as a reversal and a continuation. 6/

-Symmetrical triangles forms during a price consolidation. The direction of the target is decided after the breakout. -This pattern is neutral, neither bullish nor bearish. -It can play both as a reversal and a continuation. 7/

The diamond pattern acts as a trend reversal pattern. For both the bullish trend & the bearish trend. 8/

Double Bottom & Double Top -Double Top forms after an uptrend. And double bottom forms after a downtrend. -Both are trend reversal patterns. 9/

Falling wedge & Rising wedge -Falling wedge acts as a bearish reversal & rising wedge acts as a bullish reversal. -They can be both trend reversal or trend continuation. 10/

Flags and pennants -These are continuation patterns. Bullish for an uptrend and Bearish for a downtrend. 11/

Head and Shoulders & Inverse Head and Shoulders These are reversal patterns, which form at the end of a trend. 12/

Broadening wedges -These are continuation patterns. Bullish for an uptrend and Bearish for a downtrend. 13/

Rounding bottom & top 14/

How to trade chart patterns? -Pattern confirmation -Evaluating the risk/reward ratio -Opening the position based on price action 15/

For example: 1. Understand the trend and draw the pattern correctly. 2. Confirm the pattern with volume. 3. Evaluate the RR. 4. Enter the position after the breakout with proper stop-loss and target. 16/

Let's take an example using each pattern. # Ascending triangle 17/

# Descending triangle 18/

# Symmetrical triangle 19/

# Double Bottom/Double Top Double top in play! 20/

Falling wedge/Rising wedge Falling wedge in play! 21/

Flags/Pennants Bull Flag in play! 22/

Head and Shoulders 23/

Next step for you is to practice all these patterns as much as you can. Note: Chart patterns are not completely trustworthy even though they offer tempting trade signals. Thus it is vital to practise risk management when trading them.



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