Part 6: Types of Chart Patterns
Different types of Chart Patterns
Chart Patterns are nothing but shapes within which a chart is confined. Through analyzing these patterns in the past we find the probability of a particular pattern, breaking upwards or downwards.
Chart Patterns can be classified into 2 major subcategories:-
a) Reversal Patterns- As the name suggests, Reversal patterns reverse the trend or direction of the market. A prior uptrend or downtrend should be there, followed by a reversal pattern. The breaking of the pattern in the opposite trend must be confirmed by a spike in the volume.
b) Continuation Pattern- These can be termed as temporary period of consolidation before a move towards the same direction.