Technical Analysis For Dummies, 3rd Edition

Chapter 9

Seeing Patterns

In This Chapter

Discovering patterns

Figuring out continuation patterns

Going over reversal patterns

Measuring the measured move

Apattern is a type of indicator traditionally drawn on the chart by hand. Technical traders have been developing patterns from the earliest days of technical analysis. Until personal computers came along, Technical Analysis of Stock Market Trends by Edwards and McGee was a Bible for chart readers. Chart patterns are powerful indicators, and some rudimentary knowledge of patterns is a good idea for the most sophisticated indicator trader and the beginner alike.

I cover some classic patterns in other chapters, such as the inside day (Chapter 7) and support and resistance lines (Chapter 10). Other bar patterns are also covered in Chapter 7 (island reversal), and all the candlestick formations are considered patterns, too (Chapter 8). In this chapter, I describe a few more of the most common patterns. You often see ads for “the five best patterns” and the like. In practice, the best patterns are the ones that you can identify and ...