Hello, traders! First, you need to know how to trade using patterns.
Trading using chart patterns requires certain steps:
Identify the previous market trend.
Wait for the pattern on the chart to form and complete.
Determine whether the pattern signals a continuation or reversal of the trend.
Determine the point where the price breaks out of the pattern.
Confirm this breakout when the price closes outside the trend line, accompanied by an increase in volume. This is a safe time for trades, especially if a pullback is observed after the initial breakout.
Set stop levels below the support or resistance level or the previous candle of the entry candle.
The first trading target may be the highest value of the pattern from the breakout point.
But chart patterns also have limitations:
False breakouts: Sometimes the price reverses after a breakout, which is the opposite of what the pattern predicts.
Different interpretations: The same pattern can mean different things for different traders.
Not obvious in real time: Patterns are easier to identify in hindsight than in live markets.
Illusory patterns: Traders sometimes perceive a pattern where there is none. These patterns are for beginners.
In conclusion, although chart patterns have their drawbacks, they are a powerful tool in trading. Identifying them in real markets provides a competitive advantage. However, they are most effective when used in conjunction with other technical analysis tools.
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