Why these 10 Chart Patterns are Essential for Success?

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Most people think successful day traders:

• Never sleep

• Trade thousands of times a day

• Know complex algorithms and formulas

But really, they just understand these 10 chart patterns:

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1. Head and Shoulders

This chart pattern has 3 peaks:

• Left shoulder

• Head

• Right shoulder

Each shoulder should be close in height and the head should be the highest peak and in the middle.

This pattern indicates a bullish trend is turning into a bearish one.

2. Double Top

A bearish pattern that forms when the price:

• Reaches 2 consecutive highs

• Has a moderate drop in the middle

• & the price drops below the support

If the price doesn't drop, it's a failed double-top pattern.

3. Double Bottom

This pattern is shaped like a "W" where the 2 bottoms are the support level.

Double bottoms usually happen after downtrends and signal a potential uptrend.

This chart pattern works best for analyzing medium - long-term market movements.

4. Wedge

There are 2 types of wedges:

• Rising

• Falling

Prices tend to break out in the opposite direction of the wedge pattern.

So a rising wedge pattern = Bearish.

And a falling wedge pattern = Bullish.

It usually takes 1-7 weeks for this pattern to form.

5. Cup & Handle

The part shaped like a "U" is the cup and the slight downward drift is the handle.

Cups with wider "U" shapes are more reliable than sharper "V" shapes.

This is a bullish pattern that takes 2-12 months to form.

6. Pennant

This pattern occurs when a price consolidates before a breakout.

They tend to start with large trading volume (the flag pole) and followed by decreasing volume (the flag).

This pattern is best used in combination with other patterns.

7. Rounding Bottom

This is a rare pattern that looks like a cup and handle, but without the handle.

It's made of 3 parts:

• Decline

• Bottom

• Incline

This bullish trend will usually take 2 weeks to 3 months to form.

8. Descending Triangle

This pattern is made with a falling trend line along falling highs and a flat trend line across a series of lows.

If the price falls under the flat trend line the price will likely keep falling.

Traders usually take a short position when this happens.

9. Ascending Triangle

This pattern is a flipped descending triangle.

A flat trend line at the 2 highest points and a rising line at the 2 lowest points.

If the price goes above the flat trend line, it's bullish.

If the price falls below the diagonal line, it's bearish.

10. Symmetrical Triangle

This pattern is almost like a pennant except the trend lines have an equal slope and there's no "flag pole" present.

If the price rises above the top trendline, a breakout will occur.

If the price falls below the trendline, a breakdown will occur.

There you have it!

The 10 chart patterns successful day traders understand.

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