What are Chart Patterns?

Chart patterns are shapes or formations that are formed by the movement of prices on a stock chart. These patterns can be used by technical analysts to predict future price movements and to identify potential buying or selling opportunities. Some examples of chart patterns include head and shoulders, double tops and bottoms, and rising and falling wedges.

Head and shoulders is a bearish reversal pattern that forms after an uptrend, it’s composed of a left shoulder, a head, and a right shoulder, and a neckline.

Double tops and bottoms are formed after a sustained trend, they are two consecutive peaks or troughs that are roughly equal in height and separated by a moderate trough or peak. A double top is a bearish reversal pattern and a double bottom is a bullish reversal pattern.

Rising and falling wedges are formed by converging trendlines, a Rising wedge is bearish pattern and a falling wedge is bullish pattern.

These are just a few examples of chart patterns, there are many other patterns that technical analysts use to identify potential trading opportunities. It’s important to note that chart patterns are not always accurate and should be used in conjunction with other forms of analysis.