Chapter 4: Patterns
In chapter 3 I discussed basic chart trends and trading strategies based on them. In this chapter I’ll discuss trend changes and common chart patterns that occur with trend changes. I’ll also outline some trading strategies you can use when you identify 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 ...