When trading stocks, we must be familiar with stock trading patterns. The said patterns are the price actions that happen during a particular period in the stock market charts. Since they are patterns, they tend to recur. Thus, if you are familiar with these stock trading patterns, you will immediately predict the price action. As a result, you will be able to make profitable stock investment decisions. Below are 15 stock trading patterns that you should start familiarizing yourself with.
Stock Trading Pattern #1 – Price channel
A price channel is a series of ups and downs in the price action. These ups and downs flow into an invisible “channel” which is made up of parallel lines. If the price indicator stays within the invisible parallel line, then that is a price channel pattern. This pattern can either go up or in other terms, bullish, or it can also go down or bearish.
Stock Trading Pattern #2 – Double top
A double top is one of the stock trading patterns that are easy to recognize. This pattern has two peaks that represent a bearish reversal. It takes the shape of the letter “M” and will usually indicate a downward trend once it appears.
Stock Trading Pattern #3 – Double bottom
If it looks like a “W”, then that is called a double bottom which is an inverted version of the Double top pattern. This pattern means that the price indicator attempted price breakouts twice but failed. However, it will make a price breakout and will likely continue to go to an upward trend.
Stock Trading Pattern #4 – Rounding top or bottom
A rounding top or bottom is shaped like a half-circle. If it is a rounding top, it means the price went into an upward trend but curved in the middle to go down. How important is liquidity to you rm? While the rounding bottom is when the price action went into a bearish state and curved in the middle to become bullish.
Stock Trading Pattern #5 – Bump and Run
The Bump and Run pattern is also one of the stock trading patterns that are easy to spot. It follows a bullish trend where there are two phases. The first phase is the bump where a lead-in angle of around 30 to 45 is rising. Then the pattern will turn into a steeper line which will be the run. The angle of the second phase is usually around 45 to 60 steeper.
Stock Trading Pattern #6 – Symmetrical Triangle
The symmetrical triangle can be included among the stock trading patterns that are not easy to see. It is composed of two trend lines that start to meet which usually brings about a price breakout. Usually, this stock trading pattern follows the stock market’s general trend.
Stock Trading Pattern #7 – Ascending Triangle
The ascending triangle, or also known as the bullish symmetrical triangle, has two invisible lines. The first line is called a horizontal support line which connects the line and moves in an upward trend. While the second line is called the resistance line which also moves upward and connects the lows.
Stock Trading Pattern #8 – Descending Triangle
The descending triangle is the opposite of the ascending one since it moves downward. It also has a horizontal support line and a resistance line that flows in a downward trend. That is why they are also called bearish symmetrical triangles.
Stock Trading Pattern #9 – Flag
The Flag pattern is among the very common stock trading patterns. It is shaped like a sloping rectangle. In this pattern, the support line and the resistance line are paralleled. But eventually, it will lead to a breakout which normally goes the opposite direction from the trendline.
Stock Trading Pattern #10 – Pennant
The Pennant pattern is almost similar to the Flag pattern. The difference is that the Pennant pattern is larger. Furthermore, the support line and the resistance line will meet at some point.
Stock Trading Pattern #11 – Rising Wedge
The Rising Wedge pattern is where a tight price movement occurs between lines. The lines this pattern has are the support and resistance line that moves upward. The prediction for this stock trading pattern is that it will eventually break through the support line.
Stock Trading Pattern #12 – Falling Wedge
The Falling Wedge pattern is the same as the Rising Wedge. They only have two differences, the first one being that the lines move downward. The second one is that eventually, it will break through the resistance line.
Stock Trading Pattern #13 – Cup and Handle
The Cup and Handle pattern is one of the bullish stock trading patterns. It is the same with the Rounding bottom pattern. The difference is that after it makes a bullish curve, it will move down once more and immediately make another but more shallow bullish curve. That smaller curve looks like a cup’s handle hence, the name.
Stock Trading Pattern #14 – Head and Shoulder
The Head and Shoulder pattern shows the rise of the price. But once it reaches a peak, it will eventually fall to the level of the point where it first arose. Then, it will move upward once more and even surpass its previous peak. Once more, it will go on a downward trend also falling to the level of its rising point. Then, it will rise again but it will only reach the peak also on the same level as the first peak. Once again, it will fall to the starting point level. This pattern also has an inverted version which is sometimes called the Bottom Head and Shoulder.
Stock Trading Pattern #15 – Triple Top or Bottom
The Triple Top pattern is similar to the Double top. The difference is that it will top for the third time. It also has the opposite version which is the Triple Bottom. These stock trading patterns are categorized as reversal patterns.
Stock trading patterns are important stock trading tools that are utilized in technical analysis strategies. They have an integral role when looking for market trends and making the right predictions. If you want to learn how to make the right market trend prediction using stock trading patterns, visit our site now.