Chart Pattern Analysis: Chart Pattern
Many traders do the analysis before doing an open position in the market. One of the analyzes used is reading price charts by looking at chart patterns, determining support and resistance levels to specifying setup or trading plan (entry level, stop and target).
A chart pattern will give traders a signal about the price of a pair that is likely to move in one direction or vice versa when the pattern is completed.
There are two types of patterns in technical analysis that are continuous (continuous) and reversal (reversal) patterns. The reversal pattern gives a signal that the previous trend will reverse after the price movement completes a pattern. On the contrary, continuous pattern indicates that the previous trend will continue unidirectional after price movement completes a pattern.
The difficulty that you often encounter when analyzing is to identify the pattern of the graph and catch the next signal because the graph encountered is not an exact science. In fact the identification of this graphic pattern is closer to the point of view of the art of analysis than of science. Although pattern and supporting components have been formed on the charts, the price movement should not follow the pattern shown by the graph.
However, there is no need to worry about using chart patterns, if you understand the concept of reading graphics then your quality of analysis can be improved by looking at other indicators.
There are several concepts that need to be understood before mum to the discussion of a specific graph pattern. The first is the trend line. To get this trend line you have to draw a line on the graph representing the support and resistance levels of a pair. Second is support and resistance. The support line is when the price is hard to fall lower than that level. On the contrary, the resistance line is when the price is difficult to continue rising higher than that level. This trend line can also be a constant level (obtained from a horizontal line).
Well, once you understand these two concepts then we can further explore the graphs to get the different patterns that are often used by technical analysts.