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Classical Chart Patterns

The article discusses classical chart patterns essential for traders, categorizing them into trend reversal and trend continuation patterns. It highlights various patterns such as ascending triangles, descending triangles, and head and shoulders, explaining their implications for trading decisions. Additionally, it provides guidance on how to trade these patterns effectively by confirming them and evaluating risk/reward ratios.

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274 views14 pages

Classical Chart Patterns

The article discusses classical chart patterns essential for traders, categorizing them into trend reversal and trend continuation patterns. It highlights various patterns such as ascending triangles, descending triangles, and head and shoulders, explaining their implications for trading decisions. Additionally, it provides guidance on how to trade these patterns effectively by confirming them and evaluating risk/reward ratios.

Uploaded by

sudherson
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Classical Chart Patterns: Every

Trader should know


Nilesh Dwivedi · Follow
Published in Coinmonks · 5 min read · Jan 24, 2023

121 2

In this article we will talk about classic chart patterns that you can use in
trading with examples

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.

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
article we’re going to discuss:
Different types of chart patterns and how to trade them?

Classic chart patterns are divided into two categories. -


Trend reversal chart patterns -Trend continuation chart patterns

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.
Ascending triangles act as a bullish pattern. They can play both as
a reversal and a continuation.
Descending triangles act as a bearish pattern. They can play both as a reversal
and a continuation.
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.

The diamond pattern acts as a trend reversal pattern. For both the bullish
trend & the bearish trend.
Double Bottom & Double Top -Double Top forms after an uptrend. And
double bottom forms after a downtrend. -Both are trend reversal patterns.

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.

Flags and pennants -These are continuation patterns. Bullish for an uptrend
and Bearish for a downtrend.
Head and Shoulders & Inverse Head and Shoulders These are reversal
patterns, which form at the end of a trend.

Broadening wedges -These are continuation patterns. Bullish for an uptrend


and Bearish for a downtrend.
Rounding bottom & top

How to trade chart patterns?


Pattern confirmation
Evaluating the risk/reward ratio
Opening the position based on price action

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.

Let’s take an example using each pattern. # Ascending triangle


# Descending triangle
# Symmetrical triangle
Double Bottom/Double Top Double top in play!
Falling wedge/Rising wedge Falling wedge in play!
Flags/Pennants Bull Flag in play!
Head and Shoulders

Next step for you is to practice all these patterns as much as you can. You can
save this article for your future reference

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