Price Patterns signify a chart trend in which securities show sustained change inside the same direction. On the stock chart, it appears as a line connecting successive points, and is known as a pattern. As far as the advantage to traders is concerned, the important thing is to recognize which way this new trend will go prior to it actually shows up on the chart.
Practically speaking, it is a straightforward matter of the ratio of buyers and sellers. If you can find a lot more buyers than sellers, demand increases as well as the bullish trend feeds on on its own by attracting much more buyers at progressively higher prices. It functions the opposite way too, along with a bearish trend falls in on itself with more and more sellers obtaining out at increasingly lower prices.
This movement will eventually lose steam then one of two things will occur - either the stock maintains a steady value (which means the total number of buyers and sellers is approximately the same). Or it begins reversing and goes in the other direction. These are the 2 types of price patterns, known as continuation and reversal.
Regardless of which of these two price patterns takes over, the important resistance point at which the previous trend can longer be maintained is the place where investors ought to begin thinking about what's going to happen next. There's not much point in watching for it to happen and then making a decision. For this reason technical analysts are required to closely monitor their real time data screens and charts, to ensure that any kind of early indicators about the direction can be picked up.
By studying the stages that happen just before the actual trend kicks in, traders can read the charts like an astrologer reads tea leaves. There's the old trend that ends when a consolidation zone begins, and also the breakout point where the consolidation zone ends and the new trend begins. Old trends are those which are about to go horizontal or reverse course.
Consolidation zones are usually an in-between period when the old trend is no longer seen on the chart, but it isn't obvious exactly what the new one will likely be. Following a brief consolidation period, there is a breakout point that is where the new trend will begin. All of this may seem like a easy explanation of a stock chart, however forecasting these points, specific zones and trends prior to it may be observed on the chart is not so simple.
To do this accurately, analysts have to spend an ungodly amount of time staring at screens and keeping track of real time data. They need to predict the exact moments when all these stages take place, and know which way the new trend is going to go. Once it occurs, it is relatively difficult to earn high profits because trade volumes go up which further fuels the cycle.
Practically speaking, it is a straightforward matter of the ratio of buyers and sellers. If you can find a lot more buyers than sellers, demand increases as well as the bullish trend feeds on on its own by attracting much more buyers at progressively higher prices. It functions the opposite way too, along with a bearish trend falls in on itself with more and more sellers obtaining out at increasingly lower prices.
This movement will eventually lose steam then one of two things will occur - either the stock maintains a steady value (which means the total number of buyers and sellers is approximately the same). Or it begins reversing and goes in the other direction. These are the 2 types of price patterns, known as continuation and reversal.
Regardless of which of these two price patterns takes over, the important resistance point at which the previous trend can longer be maintained is the place where investors ought to begin thinking about what's going to happen next. There's not much point in watching for it to happen and then making a decision. For this reason technical analysts are required to closely monitor their real time data screens and charts, to ensure that any kind of early indicators about the direction can be picked up.
By studying the stages that happen just before the actual trend kicks in, traders can read the charts like an astrologer reads tea leaves. There's the old trend that ends when a consolidation zone begins, and also the breakout point where the consolidation zone ends and the new trend begins. Old trends are those which are about to go horizontal or reverse course.
Consolidation zones are usually an in-between period when the old trend is no longer seen on the chart, but it isn't obvious exactly what the new one will likely be. Following a brief consolidation period, there is a breakout point that is where the new trend will begin. All of this may seem like a easy explanation of a stock chart, however forecasting these points, specific zones and trends prior to it may be observed on the chart is not so simple.
To do this accurately, analysts have to spend an ungodly amount of time staring at screens and keeping track of real time data. They need to predict the exact moments when all these stages take place, and know which way the new trend is going to go. Once it occurs, it is relatively difficult to earn high profits because trade volumes go up which further fuels the cycle.