Chart Patterns - Learning To Interpret Market Movements

One of the things that new investors are often unprepared to participate in is chart analysis

, and this usually just because they've never been exposed to chart patterns and interpretation before. If you're interested in being successful in the market, it's important that you learn to use any available to make wise decisions about when to pick up more shares of a certain stock, and when to sell so that they can make a profit or minimize loss. Over time, patterns of price points form in the market, and if you learn about technical analysis, you'll know that these patterns to help them make predictions about what will happen in the future of a certain stock.

There was a time in the history of the stock market that people were required to track, record, and list stock prices and trading ranges on paper by hand, but thanks to the internet and the development of electronic tracking software, these chart patterns can now be aggregated automatically, and archived for analysis at any time. It's important to choose a charting tool early in your stock market learning process, so that you can develop a better understanding of how to use it to its full potential as you become a stronger investor.

An early look into chart patterns and how they can be analyzed will allow you to see that there are literally hundreds of different patterns and gaps, and trends that you can look for in the market. Although this might seem overwhelming, it's important that you at least develop a working knowledge of some of the more common patterns and develop the ability to infer their meaning any time you can spot them in the charts.

One of the most common chart patterns is called the head and shoulders. This pattern is considered to be a reversal pattern because it is generally observed while the market is enjoying an uptrend, but is used to alert traders to an eventual downtrend. Once you see this pattern on the charts, you'll know that its name came from the small spikes in price that occur on either side of a big spike, forming the outline of a head and shoulders. Another simple type of chart to be familiar with is the candlestick. Although this chart is simply, the candlestick-shaped figures it contains are packed full of information that can be drawn from their size, color, and the appearance of wicks on their edges.

by: Aaron Livingston

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