Chart patterns

A pattern is a recognisable shape that appears in a chart; that is, a sequence that recurs periodically in one chart or from one chart to another. Because patterns are recurring changes, if you can recognise them you’re able to forecast the most likely future scenario and improve the likelihood of successful trades.

It’s rather like a synoptic chart used with weather forecasting. To the untrained eye it’s just a series of lines joining points of equal pressure. However, a meteorologist can recognise patterns in the chart and draw on past experience with similar patterns to forecast the likely impact on the weather.

Trading strategies based on patterns involve four steps. These are:

⇒ examine the chart to identify trend changes and patterns