In trading, "patterns" is a term used to describe artistic patterns or shapes that appear on price charts, helping traders analyze market movement and make decisions. Here are the most common patterns in trading:
1. Peaks and Troughs: Refer to the highest and lowest prices on the chart and are used to identify trends and price ranges.
2. Continuation Patterns: Indicate the continuation of the current trend after a period of correction, with notable examples including:
- Flag
- Pennant
- Triangles
3. Reversal Patterns: Indicate the likelihood of a trend change, with the most famous being:
- Head and Shoulders
- Double Top
- Double Bottom
- Triple Top/Bottom
4. Rectangle or Range: Appears as stable support and resistance levels, where the price moves between these levels.
5. Flags and Pennants: Continuation signals indicating a temporary pause before resuming the prevailing trend.
