Recognizing the Potential of Chart Patterns

The key aspect to unlocking chart patterns by identifying which side of the pattern the greatest potential energy is, is to know which type of pattern you’re looking at. There are reversal chart patterns such as the head and shoulders pattern we’ve looked at here and there are continuation patterns such as flag formations. Reversal patterns have the greatest energy in the direction from where they originate from. Continuation patterns want to break out in the same direction as they have already moved.

Chart patterns can be great if you use them well. But if you don’t, you can find yourself quickly under water when the strongest potential energy starts to take hold of the market.

“Anger is a wind which blows out the lamp of the mind.”

— Robert G Ingersoll, American Political Leader

“Everyone starts from scratch, but not everyone keeps on scratching!”

— Anonymous