Every Investor Should Know The Basic Chart Patterns | Blog about chart patterns

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  1. What is the meaning of the Stock Market?
  2. What are Chart Patterns & Technical Analysis?
  3. Why is it important to learn about Chart Patterns?
  4. What are the different kinds of Chart Patterns?

“Power concedes nothing without a demand, it never did and it never will — Frederick Douglass”

Power only admits in front of demand after resisting it initially. This is an easy to understand elaboration of the quote and rightly explains the essence of the stock market.

What is the meaning of the Stock Market?

Stock Market is a place where buyers and sellers meet to exchange equity shares of public corporations as per google search and the one with more demand supersedes the one who was in power earlier.

What are Chart Patterns & Technical Analysis?

Technical Analysis(TA) is a way of anticipating the price of the stock in the near future by looking at chart patterns, trading volumes, price movement and a few other factors depending upon the type of trader one is Scalper, Swing trader or Intraday trader. (TA) works on market sentiments and short-term trends and best bet is when the holding period is not long term>1/2years. Different set of indicators work for different type of traders as per their timeframe

Chart Patterns are formed when big institutions like FII’s, Hedge Funds and others pour a lot of money in a stock on the basis of the earnings projection on quarterly and yearly basis which further creates demand and supply in the market. This is when retailers enter the markets by studying the chart patterns and start investing. Few chart patterns are considered as continuation patterns and some of them as reversal patterns

REVERSAL PATTERNS EXAMPLES:

CONTINUATION PATTERNS EXAMPLES:

Why is it important to learn about Chart Patterns?

Chart patterns tell one what to play and how to play. However, (TA) triggers the buy or sell decision on the basis of entry/exit points. A clean and clear chart pattern is required to know one’s target, entry and exit levels.

What are the different kinds of Chart Patterns?

There are multiple chart patterns but all of them are formed on the same concept of demand & supply. However, few of them are most widely seen patterns:

Let’s us try and understand Head and Shoulder pattern in terms of buyers and sellers

The stock price was initially in uptrend and made a temporary top, soon after the retracement, price made a new high & one can also say that price was following a trendline by making (H-H). Soon, one can see that the trendline was broken and price took support from the exact levels from where the stock reversed last time showing buyer’s zone. Again due to buying sentiment, price started an upward journey but since sellers were getting powerful and buying strength was missing, price broke the neckline and brokedown. This ride of buyers and sellers formed the Head & Shoulder pattern.

As per general market trend and chart analysis, one can take trades either on buy side or on sell side