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What Are Chart Patterns?

Chart patterns are a key part of technical analysis that traders use to identify potential trading opportunities. Think of them as visual cues on a price chart that hint at where the market might be headed next. By recognizing and interpreting chart patterns, traders can better predict future price movements and ultimately make informed decisions about when to buy or sell.

These patterns come in different shapes and forms—like triangles, head and shoulders, or double tops—and each tells a different story about market sentiment. For instance, some patterns signal that a trend might be about to reverse, while others suggest that the current trend is likely to continue.

Trend lines are another important tool in this process. By drawing lines that connect significant price points, such as recent highs or lows, traders can see the market’s overall direction and identify levels of support (where the price tends to stop falling) and resistance (where the price tends to stop rising). These lines help traders spot the best entry and exit points for their trades, ultimately giving them a better chance of success in the market.