Timing Solutions for Swing Traders: A Novel Approach to Successful Trading Using Technical Analysis and Financial Astrology

PATTERNS

Patterns are a very important aspect of technical analysis. They are the shapes or structures of formations that appear on a chart, including double tops, double bottoms, morning star, head and shoulders, triangles, rectangles, saucers, and so on. Patterns are the body language of price expressions and offer traders a means of forecasting probable price direction. There are two major types of patterns—reversal patterns and continuation patterns. Reversal is a formation pattern that indicates a likely reversal in trend is taking place, that is, from a bullish trend to a bearish trend, or vice versa. The continuation pattern indicates a temporary price retracement and on the breakout of the pattern, the prevailing trend will continue. Patterns are not infallible. There is no chart pattern that will tell you with 100 percent certainty where the price is heading. But learning the characteristics of each pattern formation and using them with other supporting indicators will give traders an edge in reading the market and timing trades. The various patterns are described in Chapter 3, Essential Patterns, which includes candlesticks and classical patterns, and Chapter 4, Elliott Waves, which includes various triangle patterns.

Candlestick charts place more emphasis on the relationship between opening and closing prices, known as the body of the candle. If the high of the candlestick is greater than the body, it is shown by a vertical line called the upper shadow. And if the low ...