Section 4:
Introduction to Price Patterns
Price patterns project the future path of stocks. The patterns do so by observing the past price action of a stock and projecting the collective intentions of buyers and sellers into the future.
Price patterns appear across all actively traded markets such as stocks, bonds, and commodities, and currencies (forex).
The current sentiment of the market and the balance between buyers and sellers is all revealed by price patterns. Sometimes there is no existence of price patterns across stocks. Other times price patterns appear across what seems like all stocks.
Price patterns occur and are applicable in all timeframes, from intraday to yearly timeframes. The beauty of price patterns is that they are recurring. Best of all, there are only a handful of patterns to learn. To further the learning process, there are examples of each of the price patterns below. Seeing more and more charts with price patterns will help to commit the patterns to memory faster.
There are two categories of price patterns: continuation and reversal. There are mirror image patterns in these two categories.
Continuation patterns predict the continuation of an existing trend, either a bullish or bearish trend. It’s important to identify the trend as bullish or bearish when trading continuation patterns.
