Chart Patterns
Posted by Hell7 on Mon, 27/07/2009 - 18:30 in
Chart patterns are formed within a chart when prices are graphed, and can be used to estimate future price movement. A very nice overview of the most common formations can be found on www.thepitmaster.com, a short introduction to fibonacci-based patterns on www.fx360.com
Some notes about chart patterns:
- The higher the timeframe on which a pattern occurs, the more likely it is correct. For example, a wedge visible on a 4 hour chart is far more reliable than one visible only on a 3 min chart.
- One should always be very careful when entering a position on a breakout of such a pattern, as breakouts often prove to be false. Especially formations like the Head and Shoulders recently seem to show more failures then successes.
