There are two major ways to trade the financial markets: swing
trading and trend following. Swing traders use technical analysis to
look for short-term price movement and capture gains in a relative
short-term period. They look for the price patterns that hint for a
reversal, in order that they can pick the tops and bottoms of the trend.
Trend followers pay attention to the general direction of the price
movement and enter trades by following the current direction. They would
look for continuation patterns on the price charts to predict the
future direction of the trend, or exit the trade until the reversal
patterns appear.
The following articles discussed the rules for identifying reversal
patterns and continuation patterns, and introduced some well-known
reversal and continuation patterns. The reversal patterns include: Head
and Shoulders, Double Tops and Bottoms, Triple Tops and Bottoms and
Saucers. The continuation patterns include Triangles (Ascending,
Descending, Symmetrical and Broadening), Flags and Pennants, Wedges and
Rectangles.
The patterns exhibit the psychology and momentum of the market. No
matter which type of traders you are, it is always helpful to be aware
of the patterns. Using the patterns is not a stand-alone method of
trading the market, in fact, it is better to be used with a mix of trend
lines and technical indicators. Beginners might first find it difficult
to identify the patterns; they can familiarise the patterns by looking
at the historical charts and try to identify the patterns.
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