What are Chart Patterns in Technical Analysis? How to determine the entry Exit levels?
Ever looked at the chart of a stock or commodity? Most likely, you have. Just about everyone who has ever analyzed security takes a look at the price movements of the past month, quarter, year, etc.
And for good reason: charts can provide a lot of information in a small amount of time.
The chart reader also can determine the volatility of the company’s shares by looking at the movements on the chart. A company whose stock exhibits very jagged up-and-down movements is clearly more volatile than a company whose stock moves relatively smoothly across time.
A single chart has the ability to display a significant amount of information. More conceptually, charts are an illustration of the struggle between buyers and sellers. While this point is debatable between the schools of investment like technical, fundamental and efficient market analysis, technical analysis assumes that: a) Prices discount everything, b) Prices move in trends, and c) History repeats itself.
Assuming the above tenets are true, charts can be used to formulate trading signals and can even be the only tool a trader utilizes.
Chart patterns signal to traders that the price of a security is likely to move in one direction or another when the pattern is complete.
There are two types of patterns in this area of technical analysis:
A reversal pattern signals that a prior trend will reverse on completion of the pattern. Conversely, a continuation pattern indicates that the prior trend will continue onward upon the pattern’s completion.
The difficulty in identifying chart patterns and their subsequent signals is that chart use is not an exact science. In fact, it’s often viewed as more of an art than a science.
Once the basics of charting are understood, the quality of chart patterns can be enhanced by looking at volume and secondary indicators.
There are several concepts that need to be understood before reading about specific chart patterns. The first is a trend line, which is a line drawn on a chart to signal a level of support or resistance for the price of the security.
Technical Analysis is a method used to predict future prices on the basis of historical price, volume, and open interest. Technical Analysis can help investors anticipate what is likely to happen in the coming days, weeks, or months. The benefit of this course is that you can generate intraday, short term, and long term calls. You can easily interpret the trend of the market with the help of Price Analysis.
Theory and practical sessions will be carried out subsequently during the live market to apply the technical analysis principles post the course completion.