CHART PATTERNS

Classification of Chart Parterns

1.Direction; this refers to the direction price will go to (bullish or bearish) after the pattern appears.

2. TYPE; Reversal,continuation,neutral.

REVERSAL; Price will change its direction after this pattern appears.

CONTINUATION; price will continue in its direction after this parttern appears.

NEUTRAL; price will either go up or down after this pattern appears.

DIRECTION + TYPE

Eg: Bearish Reversal pattern, Bullish continuation pattern.

REVERSAL PATTERNS

*Head and shoulder pattern.

Inverse head and shoulders pattern

*Double Top [bearish reversal pattern] *Double buttom [bullish reversal pattern
*Rising wedge [bearish reversal pattern]

*Falling wedge [bullish reversal pattern]

NEUTRAL PATTERNS

*ASCENDING TRIANGLE [NUETRAL PATTERN]

SYNMMETRICAL TRIANGLE[NEUTRAL PATTERN]

DESCENDING TRIANGLE[NEUTRAL PATTERN]

BULLISH RECTANGLE[BULLISH CONTINUATION PATTERN]

BEARISH RECTANGLE[BEARISH CONTINUATION PATTERN]

BULLISH PENNANT [BULLISH CONTINUATION PATTERN]

TRADING CHART PATTERNS

The ideal way to trade chart patterns is to allow price retrace to the breakout line or neckline of the
patter, though sometimes doesn’t happen.

Consequently traders might want to chase opportunities wihich will eventually result in bad risk
management practices.

*wait for price breakout

*wait for retest

*Observe as price respects the line

*open the trade with proper risk/reward ratios, and correctly placed stops.

ADVANTAGES OF CHART PARTTERNS

*EASY TO MEMORISE

*SIMPLE TO TRADE

*STRAIGHT FORWARD LOGIC

DISADVANTAGES

*NOT EASY TO SPOT.

*THEY ARE NOT PRECISE AT ALL.

*CHART PATTERNS WILL FAIL YOU SOMETIMES.

*FOCUSING JUST ON PRICE PATTERNS WILL BLIND YOU TO OTHER INTERESTING OPPURTUNITIES.

*PRICE PATTERNS WILL ENCOURAGE YOU TO CHASE OPPORTUNITIES