Candlestick Trading Blog
At first glance a grouping of stock trading patterns may look like childish drawings of boxes and pyramids, trumpets and pipes. Stock trading patterns are typically displayed as a pair of lines defining the outer limits of stock trading and a set of lines showing price movement within the corridor of the outer lines. The outer lines may be converging, diverging, or in parallel and the general movement may be up or down. Depending upon which of these is the case, stock trading patterns can reliably predict market trends and market reversal. Stock trading patterns work in trading stocks, trading options, trading commodities, and trading futures. Pattern analysis works because stock prices and other market prices repeat themselves in various patterns and the patterns predict where the market is going next. Candlestick pattern formations worked in ancient Japan and Candlestick analysis works in understanding stock trading patterns today. Online trading software commonly has the ability to recognize price patterns and suggest appropriate action.
Technical analysis tools can predict price movement. There are many technical indicators. In learning technical analysis of stock the beginning trader will be wise to use technical analysis stock tutorials and to learn one pattern at a time. One of many stock trading patterns is a symmetrical triangle seen in an upward trending market. This pattern can be considered to be a signal of a breakout to the upside after a market hesitation. The stock price is going up during the day and then drops very sharply. It then proceeds to climb to a price less than its most recent high and drops sharply again but not as far as its most recent low. This pattern of rising and falling but less that the previous high or low can continue two, three, or more times. Traders can print this price pattern out on paper and draw a line along both the lower prices and the higher prices. The result will be a triangle with its base where the first price drop occurred and its point somewhere in the future of the current price. What commonly happens before the triangle comes to a point is that the stock price breaks to the up side, often dramatically. This sort of technical analysis commonly works to predict price changes but why? Stock trading patterns work because the markets repeat themselves. Everyone trading a given stock will have access to all of the same information. However, traders trade differently and all traders cannot enter their trades at once. Thus the market changes infinitesimally with each executed trade and traders adjust. In the case of the symmetrical triangle in an upward trading market the true technical trader does not care why the system works, only that it does. When the market drops a bit there may be a day trader and someone only interested in long term investing who are selling the stock at a profit. When the price drops there may well be options traders executing options contracts to buy the stock. The same may be true on each successive cycle within the triangle. Then, then the stock breaks to the upside we can assume that investors believe the stock will go a lot higher and are buying. However, for the technical trader this makes little difference. The trader need only recognize stock trading patterns in order to profit. Three hundred years ago Candlestick basics evolved as rice traders recognized that they only needed to follow price patterns to profit. Candlestick chart analysis works today on in the stock market, options markets, commodities markets, and futures markets for the same reason. History repeats itself in stock trading patterns.Online Stock Market Reviews presented live via the internet by Stephen Bigalow |
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