Chart pattern is a form of pattern in the price chart that helps to predict the price movement that may happen next.
Let's get to know the types of chart patterns that traders must know!
Double Top
Reversal pattern or trend change pattern towards downtrend.
'Top' is a peak formed when the price reaches a certain level that cannot be broken.
A double top chart pattern can be seen at the end of an uptrend and resembles an 'M'.
Double Bottom
Reversal pattern or trend change pattern towards uptrend.
Occurs after a prolonged downtrend when two 'bottoms' have formed.
A double top chart pattern can be seen at the end of a downtrend and resembles a 'W'.
Head & Shoulders
Formed at the end of an uptrend movement.
It is identified by three peaks with the middle peak, or 'head', being the highest.
The other two peaks, or 'shoulders' are on the left and right of the 'head'.
After the formation of this pattern the price will usually make a decrease.
4. Cup & Handle
One of the main signs of continued price increases.
A 'cup' is formed after a downtrend followed by an uptrend that shows a 'u' shape.
After the formation of the 'cup', the price moves sideways and a trading range is created on the right side which forms the 'handle'.
A break from the 'handle' indicates a continuation of the previous uptrend.
5. Flag
Can represent continuation or reversal.
It usually appears when there is a sudden rise or fall before the continuation of the trend.
6. Ascending Triangle
Formed when there is a level of parallel resistance and steep support towards the top and forming a triangle.
If it succeeds in breaking through the resistance, the price will continue to rise again.
7. Descending Triangle
Formed when there is a parallel level of support and resistance that steeps downward and forms a triangle.
If it succeeds in breaking through the support, the price will continue to decline.
All of the above patterns are useful technical indicators that can help traders understand how or why asset prices move in a certain way.
