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In finance, is an analysis methodology for forecasting the direction of prices through the study of past market data, primarily price and .
Behavioral economics and quantitative analysis use many of the same tools of , which, being an aspect of active management, stands in contradiction to much of modern portfolio theory. The efficacy of both technical and is disputed by the efficient-market hypothesis, which states that stock market prices are essentially unpredictable, and research on whether offers any benefit has produced mixed results. As such it has been described by many academics as pseudoscience.
Fundamental analysts examine , dividends, assets, quality, ratio, new products, research and the like. Technicians employ many methods, tools and techniques as well, one of which is the use of charts. Using charts, technical analysts seek to identify price patterns and market trends in financial markets and attempt to exploit those patterns.
Technicians using charts search for archetypal price chart patterns, such as the well-known or /bottom reversal patterns, study technical indicators, moving averages and look for forms such as lines of support, resistance, channels and more obscure formations such as flags, , balance days and patterns.
Technical analysts also widely use market indicators of many sorts, some of which are mathematical transformations of price, often including up and down , data and other inputs. These indicators are used to help assess whether an asset is trending, and if it is, the probability of its direction and of continuation. Technicians also look for relationships between price/ indices and market indicators. Examples include the moving average, and . Other avenues of study include correlations between changes in Options (implied ) and put/call ratios with price. Also important are sentiment indicators such as Put/Call ratios, bull/bear ratios, short interest, Implied , etc.
There are many techniques in . Adherents of different techniques (for example: analysis, the oldest form of developed by a Japanese grain trader; Harmonics; Dow theory; and theory) may ignore the other approaches, yet many traders combine elements from more than one technique. Some technical analysts use subjective judgment to decide which pattern(s) a particular instrument reflects at a given time and what the interpretation of that pattern should be. Others employ a strictly mechanical or systematic approach to pattern identification and interpretation.
Contrasting with is , the study of economic factors that influence the way investors price financial markets. holds that prices already reflect all the underlying fundamental factors. Uncovering the trends is what technical indicators are designed to do, although neither technical nor fundamental indicators are perfect. Some traders use technical or exclusively, while others use both types to make trading decisions.
You forgot to mention another critical factor for these patterns,
and that's the success rate of these patterns.
You don't want people to see a "pattern" and blindly take that as a signal.
Bull flag pattern has only 67% success rate, compared to head & shoulders with 83% success rate.
Do you have the % success rate of other patterns ?
Remember Do not trade solely of Patterns only...Here are the success rates for these patterns:
Inverted Head and Shoulders Pattern (83.44%)
Head and Shoulders Pattern (83.04%)
Bearish Rectangle Pattern (79.51%)
Bullish Rectangle Pattern (78.23%)
Triple Bottom Pattern (79.33%)
Triple Top Pattern (77.59%)
Double Bottom Pattern (78.55%)
Double Top Pattern (75.01%)
Descending Channel Pattern (72.88%)
Ascending Channel Pattern (73.03%)
Descending Triangle Pattern (72.93%)
Ascending Triangle Pattern (72.77%)
Bull Flag Pattern (67.13% Success)
Bear Flag Pattern (67.72% Success)
Bullish Pennant Pattern (54.87%)
Bearish Pennant Pattern (55.19%)
Yes, Price action is king