Chapter 9
Seeing Patterns
IN THIS CHAPTER
Discovering patterns
Figuring out continuation patterns
Going over reversal patterns
Measuring the measured move
A pattern is a type of indicator traditionally drawn on the chart by hand but placed on charts sometimes by software. You still need to understand pattern recognition, though — don’t count on software to do interpretation for you. You may think that you’d rather have an objective indicator on the chart instead of a subjective pattern, but consider that many traders use nothing but patterns and make a good living from it. In addition, because common patterns are so widely known and even mentioned in the press and on TV, they can become self-fulfilling prophecies.
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 starting at its publication date in 1949. This was the first book that took ideas partly or mostly devised by Charles Dow but written up only in newspapers ...
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