Previously we have covered candlesticks for beginners, famous candlesticks pattern for profit and finally candle stick chart patterns, we have covered Triangle Chart Pattern in detail. In this we will be covering all other famous chart pattern. If you have not seen the previous article please have a look. We have started from very basic for beginners because we know trading is not magic and its not gambling its just simple maths and they say.
Bears make Profit, Bulls make Profit but Pigs get Slaughtered.
So learn these basics before trading instead of losing your profit in hands of Bulls and Bears.
Channels and Rectangle
Beside Triangle, the other famous candlesticks chart pattern are Channels and Rectangles. Channel is formed in between two parallel support or resistance lines. Trends lines lies in between the support and resistance lines. When the break out happens, direction indicates a strong trend is up or down. Either the trend will be in direction of slope or in reverse direction which is known as up channel and down channel.
Rectangle is parallel horizontal line in between resistance and support just like channel.
Its difficult to predict in which direction channel or rectangle will break out. So, its safe to trade with in the channel lines and exit before the breakout.
Wedges are similar to triangle that these are formed in between converging support and resistance. Wedges with positive slopes are known as Rising wedge and wedges with negative slopes are known as Falling wedge.
Commonly, Wedges make breakout in opposite direction. Rising wedge breakout in downward direction (bearish) and falling wedge breakouts in upward direction (bullish).
Head & Shoulders
Head and Shoulder pattern describes a price movement in a shape resembles to head and shoulder of a person that is why they have been given such a name. Head and shoulder is a reversal of bullish trend into bearish trend. It is make when we have to shoulders of equal length with the head in between them. It starts when trend line crosses the support line in the upward direction before formation of left shoulder, and is completed once the graph cross the support line in downward direction after the formation of right shoulder.
Inverse Head and Shoulder is simply the inverse.
These patterns are common among traders and studies shows that the breakout of head and shoulder is 10-15%. However, there is a general formula used to calculate targeted price of Head and Shoulder.
T = N – ( H – N )
Where, T = Targeted Price; N = Neckline (Support) level ; H = Highest Point (Head level)
Dealing in Share worth 1200$, With Highest point is 1250$ this makes N=1200$ and H=1250$; if you put values in formula you will have 1150$ so the targeted price will be 1150.
For Inverse Head and Shoulder we will use following formula with same calculations.
T = N + ( H – N )
Next we will cover Multiple Tops and Bottoms Pattern. This was the fourth topic of the series as mentioned. If you want to look complete course in series read this.
- Understanding Basic Candlesticks For Beginners.
- Most Famous Candlesticks to make Profit.
- Candlesticks Chart Pattern (Triangle in detail)
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