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What are Chart Patterns?

Patterns are the basic foundation of technical analysis. As prices trace their way across the chart, they create patterns that often resolve themselves in a predictable way. The primary tenet of technical analysis is the repetition of human behavior, which can be tracked as well-categorized geometric patterns on the charts. Therefore, recognizing the patterns early results in an opportunity to capitalize on their implications.

Depending on their layout, patterns signal either a price reversal or price continuation. Nonetheless, it’s important to note that, sometimes, patterns do not follow their expected path. Occasionally, prices will create fake-out moves that invalidate the original pattern. For this reason, it’s important to remember that patterns are merely a guide, not a sure-proof method for trading. Nevertheless, the classic patterns discussed in this chapter have been used by traders for many generations to successfully trade a variety of markets. Therefore, we consider them to be an essential component of any trader’s education.

About Ziad Melhem

Ziad Melhem
Ziad Melhem is the Admin of Forex.com.lb with more than 10 years of experience in the local and regional "financial wheel". With vast experience in equities, capital markets, foreign exchange, derivatives, technical analysis, and financial services, he is one of the pioneers in online trading when this financial product was first introduced to Lebanon around 2000-2001. Ziad is currently the CMO of Amana Capital Group (www.amanacapital.com).

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