Here on the Trader's Blog we talk a lot about MarketClub's "Trade Triangle" buy and sell signals, but even we often look at other indicators. If you're a frequent visitor to the blog, you have undoubtedly noticed that one of Adam's favorites is the Fibonacci retracement.
Like trading styles, the way a trader analyzes a chart can vary from trader to trader and so today we want to know what chart studies you rely on.*
After you choose your answer(s), drop us a comment and share why and how you find them to be effective in your trading.
*We don't have enough room to list them all, but if we missed one that you can't live without, leave us a note below and tell us what it is and how you use it.
In the centuries that people have been trading and charting, those same people have noticed that the market will repeat itself time and again. By studying these patterns, they were able to ascertain that when X occurs, it’s a smart time to do Y.
Do you know what you’re looking at when you open your charts?
Like their name implies, these patterns suggest that one trend is ending and the market is ready to begin another trend in the opposite direction or, perhaps more likely, move sideways for a while. As with continuation patterns, a trendline is the basic pattern to watch. If prices break through a trendline and then follow through in the same direction, this is the best evidence of a trend reversal. Keep in mind that all chart patterns apply to all trading time frames – daily, weekly, monthly, yearly, hourly or even minute-by-minute bar charts.
Double tops - This phenomenon occurs when prices reach a fresh high, back off from that high, re-test the high and back off again. The longer the time between the “twin peaks” of the highs, the more powerful the chart signal is likely to be. Variations of this pattern that look somewhat similar are called “M” tops or 1-2-3 swing tops, but the second high is usually lower than the first high for these patterns. In all of these cases, the key points are the highs, which mark a barrier that becomes strong resistance, and the interim low. If prices drop below that low, the top is confirmed, and it is signal to sell. Continue reading "Using Chart Patterns to Become a Better Trader"→