A Brief Explanation of Price Patterns in Classical Analysis
Price patterns in classical analysis are shapes that recur on price charts, helping traders predict potential future price movements. Simply put, they are the market's "fingerprints" that often tell us what will happen next.
These patterns are mainly divided into two types:
1. Continuation Patterns
These patterns appear during an existing price trend (upward or downward) and indicate that the price will continue in the same direction after the pattern completes. They serve as a "short break" for the market before it resumes its original path.
Common examples include:
Triangles:
Symmetrical Triangle: Indicates a period of indecision before resuming the trend.
Ascending Triangle: Often signifies the continuation of the upward trend.
Descending Triangle: Often signifies the continuation of the downward trend.
Flags and Pennants:
Flags: A sharp but short correction in the form of a sloping channel against the original trend.
Pennants: A correction in the shape of a small symmetrical triangle.
Both indicate a short pause before resuming the strong trend.
Rectangles: Sideways price movement between two parallel support and resistance lines, indicating accumulation or distribution before continuing the trend.
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