Hey guys!
Today we'll have a look at chart patterns - which ones are the most popular, what do they look like, and how you can leverage them in your own trading!
Chart patterns are technical analysis tools used to predict price movements based on chart formations. There are two main types of chart patterns - reversal patterns and continuation patterns. Reversal patterns suggest a shift in the prevailing trend, while continuation patterns suggest that the trend is likely to continue.
How to trade these chart patterns effectively using trendlines on Tradingview?
Setting alerts allows you to act quickly on the trading opportunities that the chart patterns indicate. This is a super-effective way to manage these chart patterns.
The Triangle pattern
It can be both a continuation and reversal pattern. It consists of three types of triangles:
Symmetrical Triangle
The symmetrical triangle is a classic sideways pattern where the market consolidates, creating lower highs and higher lows that look like a squeeze. Neither the bulls nor the bears have control over the current movement during the pattern.
Ascending Triangle
The ascending triangle pattern forms when the price creates a series of higher lows within a clear resistance level. This indicates that buyers are unable to break through the resistance, but selling pressure from bears is weakening with each attempt. The bulls may take control and drive a breakout.
Descending Triangle
The Descending Triangle is an inverse formation of the ascending triangle and is a bearish continuation pattern that typically forms in a downtrend. To identify this pattern, look for a clear support level followed by a series of lower highs. This indicates that buyers are unsuccessful in pushing the price higher and each attempt weakens, potentially leading to a bearish breakout.
Pennant Chart Pattern
A pennant pattern is a continuation pattern that forms when the price makes a significant move in either direction and then consolidates in a sideways movement.
Bullish Pennant Pattern
A bullish Pennant Pattern is where the price is likely to move in the same direction it was trading before entering the consolidation period. It forms after a sharp move higher, followed by a pennant, and then a continuation breakout. To trade this pattern, traders typically place a long order above the pennant and set a stop below the bottom of the pennant to avoid false breakouts.
Bearish Pennant Pattern
The Bearish Pennant Pattern is the inverse of the Bullish Pennant Pattern. It forms after a sharp move lower, followed by a pennant, and followed by a breakout to the downside, signaling a continuation of the overall downtrend. Traders often take advantage of bearish pennants by placing a short order at the bottom of the pennant and a stop loss above the pennant to limit their losses in case the price moves against them.
Wedge Chart Pattern
Wedge Patterns can be both continuations and reversals based on the market trend.
Rising Wedge Pattern
The Rising Wedge Pattern is identified by upward-sloping support and resistance levels in which the support level is steeper than the resistance level and creates a wedge. If the Rising Wedge Pattern forms during a downtrend, it is often used as a continuation. On the other hand, if it is formed during an uptrend, it could indicate a potential reversal. Traders typically place their entry orders when the price breaks out of the wedge formation.
Falling Wedge Pattern
The Falling Wedge Pattern is characterized by a downward-sloping resistance level and a steeper upward-sloping support level. This pattern is usually a continuation if it forms during an uptrend. And it could signal a possible reversal if it forms at the bottom of a downtrend.
Flag Pattern
The flag pattern is a continuation pattern and is useful for price action analysis.
Bullish Flag Pattern
The Bullish Flag Pattern is formed during a strong uptrend when the price makes a sharp move higher creating the pole, followed by a sideways consolidation which forms the flag. it can be formed by two rallies separated by a brief retracement period, with the first rally creating a sharp spike known as the flagpole.
Bearish Flag Pattern
The Bearish Flag Pattern is formed during a downtrend when the price pauses sideways to create the flag form after a sharp moving lower. Price often consolidates or rebounds slightly higher before continuing with the trend. The flagpole forms on an almost vertical panic price drop and is followed by a bounce that has parallel upper and lower trendlines to form the flag.
Channels
A channel chart pattern is a continuation and it consists of two parallel lines that act as zones of support and resistance.
Bullish Channel
Bullish Channel is a continuation pattern with a positive slope. The previous uptrend will likely continue if prices break through the upper channel line. There is no theoretical price objective on this chart pattern, and the movement is bullish, which can continue as long as the bullish channel support line is not broken.
Bearish Channel
The Bearish Channel is a continuation pattern with a negative slope. The previous bearish trend will likely continue if prices break through the lower channel line. It's not recommended to go long when the price touches the lower band as the trend may continue moving along it. Corrections towards the upper band in a downward trend are usually weaker.
Horizontal Channel
Horizontal Channel forms when the price moves sideways or when it is in a consolidation phase. A line is said to be "valid" if the price line touches the support or resistance at least 3 times. The horizontal channel pattern is considered valid if the price touches the support line at least 3 times and the resistance line twice (or the support line at least twice and the resistance line 3 times).
That is the end of part one, hope you found it useful! - Don't forget to follow us for more
Today we'll have a look at chart patterns - which ones are the most popular, what do they look like, and how you can leverage them in your own trading!
Chart patterns are technical analysis tools used to predict price movements based on chart formations. There are two main types of chart patterns - reversal patterns and continuation patterns. Reversal patterns suggest a shift in the prevailing trend, while continuation patterns suggest that the trend is likely to continue.
How to trade these chart patterns effectively using trendlines on Tradingview?
- Draw the chart patterns you see on the cheat sheet.
- Create alerts for your drawn trendlines. Set the alarms when the price crossing up/down of the trendline you draw.
- Click on the "Alert" icon in the menu. This will bring up the alert creation window. You can select whatever conditions you want, I usually just use crossing up/down, and change the message to something I recognize.
- Click "Create" to save the alert.
Setting alerts allows you to act quickly on the trading opportunities that the chart patterns indicate. This is a super-effective way to manage these chart patterns.
The Triangle pattern
It can be both a continuation and reversal pattern. It consists of three types of triangles:
- Symmetrical Triangle
- Ascending Triangle
- Descending Triangle
Symmetrical Triangle
The symmetrical triangle is a classic sideways pattern where the market consolidates, creating lower highs and higher lows that look like a squeeze. Neither the bulls nor the bears have control over the current movement during the pattern.
Ascending Triangle
The ascending triangle pattern forms when the price creates a series of higher lows within a clear resistance level. This indicates that buyers are unable to break through the resistance, but selling pressure from bears is weakening with each attempt. The bulls may take control and drive a breakout.
Descending Triangle
The Descending Triangle is an inverse formation of the ascending triangle and is a bearish continuation pattern that typically forms in a downtrend. To identify this pattern, look for a clear support level followed by a series of lower highs. This indicates that buyers are unsuccessful in pushing the price higher and each attempt weakens, potentially leading to a bearish breakout.
Pennant Chart Pattern
A pennant pattern is a continuation pattern that forms when the price makes a significant move in either direction and then consolidates in a sideways movement.
- Bullish Pennant Pattern
- Bearish Pennant Pattern
Bullish Pennant Pattern
A bullish Pennant Pattern is where the price is likely to move in the same direction it was trading before entering the consolidation period. It forms after a sharp move higher, followed by a pennant, and then a continuation breakout. To trade this pattern, traders typically place a long order above the pennant and set a stop below the bottom of the pennant to avoid false breakouts.
Bearish Pennant Pattern
The Bearish Pennant Pattern is the inverse of the Bullish Pennant Pattern. It forms after a sharp move lower, followed by a pennant, and followed by a breakout to the downside, signaling a continuation of the overall downtrend. Traders often take advantage of bearish pennants by placing a short order at the bottom of the pennant and a stop loss above the pennant to limit their losses in case the price moves against them.
Wedge Chart Pattern
Wedge Patterns can be both continuations and reversals based on the market trend.
- Rising Wedge Pattern
- Falling Wedge Pattern
Rising Wedge Pattern
The Rising Wedge Pattern is identified by upward-sloping support and resistance levels in which the support level is steeper than the resistance level and creates a wedge. If the Rising Wedge Pattern forms during a downtrend, it is often used as a continuation. On the other hand, if it is formed during an uptrend, it could indicate a potential reversal. Traders typically place their entry orders when the price breaks out of the wedge formation.
Falling Wedge Pattern
The Falling Wedge Pattern is characterized by a downward-sloping resistance level and a steeper upward-sloping support level. This pattern is usually a continuation if it forms during an uptrend. And it could signal a possible reversal if it forms at the bottom of a downtrend.
Flag Pattern
The flag pattern is a continuation pattern and is useful for price action analysis.
- Bullish Flag Pattern
- Bearish Flag Pattern
Bullish Flag Pattern
The Bullish Flag Pattern is formed during a strong uptrend when the price makes a sharp move higher creating the pole, followed by a sideways consolidation which forms the flag. it can be formed by two rallies separated by a brief retracement period, with the first rally creating a sharp spike known as the flagpole.
Bearish Flag Pattern
The Bearish Flag Pattern is formed during a downtrend when the price pauses sideways to create the flag form after a sharp moving lower. Price often consolidates or rebounds slightly higher before continuing with the trend. The flagpole forms on an almost vertical panic price drop and is followed by a bounce that has parallel upper and lower trendlines to form the flag.
Channels
A channel chart pattern is a continuation and it consists of two parallel lines that act as zones of support and resistance.
- Bullish Channel
- Bearish Channel
- Horizontal Channel
Bullish Channel
Bullish Channel is a continuation pattern with a positive slope. The previous uptrend will likely continue if prices break through the upper channel line. There is no theoretical price objective on this chart pattern, and the movement is bullish, which can continue as long as the bullish channel support line is not broken.
Bearish Channel
The Bearish Channel is a continuation pattern with a negative slope. The previous bearish trend will likely continue if prices break through the lower channel line. It's not recommended to go long when the price touches the lower band as the trend may continue moving along it. Corrections towards the upper band in a downward trend are usually weaker.
Horizontal Channel
Horizontal Channel forms when the price moves sideways or when it is in a consolidation phase. A line is said to be "valid" if the price line touches the support or resistance at least 3 times. The horizontal channel pattern is considered valid if the price touches the support line at least 3 times and the resistance line twice (or the support line at least twice and the resistance line 3 times).
That is the end of part one, hope you found it useful! - Don't forget to follow us for more
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