That’s a whole lot of chart patterns we just taught you right there. We’re pretty tired so it’s time for us to take off and leave it to you from here…
Just playin’! We ain’t leaving you till you’re ready!
In this section, we’ll discuss a bit more how to use these chart patterns to your advantage.
It’s not enough to just know how the tools work, we’ve got to learn how to use them. And with all these new weapons in your arsenal, we’d better get those profits fired up!
Let’s summarize the chart patterns we just learned and categorize them according to the signals they give.
Reversal patterns are those chart formations that signal that the ongoing trend is about to change course.
If a reversal chart pattern forms during an uptrend, it hints that the trend will reverse and that the price will head down soon.
Conversely, if a reversal chart pattern is seen during a downtrend, it suggests that the price will move up later on.
In this lesson, we covered six chart patterns that give reversal signals. Can you name all six of them?
Continuation chart patterns are those chart formations that signal that the ongoing trend will resume.
Usually, these are also known as consolidation patterns because they show how buyers or sellers take a quick break before moving further in the same direction as the prior trend.
We’ve covered several continuation chart patterns, namely the wedges, rectangles, and pennants. Note that wedges can be considered either reversal or continuation patterns depending on the trend on which they form.
THE UPTREND CONTINUE
Falling Wedge Bullish Rectangle Bullish Pennante
THE DOWN TREND CONTINUE
Rising Wedge Bearish Rectangle Bearish Pennante