Candlestick chart patterns are the most important aspect to learn if you want to become a successful trader. Price action is instant and the most accurate trading indicator of them all. It forms the basics of candlesticks and these patterns show very important support and resistance levels. Patterns such as flags, pennants, triangles, wedges, and reversals.
What Are Stock Chart Patterns?
- Learning stock chart patterns in trading is key. Everyone wants to find the most successful chart patterns for his or her trading plan, and then trade them over and over. Patterns are formed due to the tug of war between the bulls and the bears. Candlesticks are the foundation of trading. People need and want anything that can give them a leg up on the competition. Chart patterns can do that.
Do you know how to trade candlestick chart reversal patterns? Some people trade and don’t know patterns and still attempt to trade! Not good. Don’t worry if this is you, you’ve got time to learn.
The stock market is a war between buyers and sellers. Bears and Bulls. Hedge funds vs retail traders. I could go all day with my list of who vs who but you get the drift. The two are constantly battling for control. As a result, one side typically has control until the other wrestles it from them.
Indeed, they will lose steam and things reverse. Finding those reversals can be a powerful trading tool. It can protect your profits or result in making new profit.
Trading is emotional. Money often gets people that way. Markets move based off greed and fear. Those emotions of greed and fear are caused by us. Especially if we’re trading without knowing the proper way to trade.
Emotions have wreaked havoc on trading probably since it began. In fact, a 17th century rice trader by the name of Homma saw a correlation between the price of rice and emotion.
He wanted to come up with a way to track how emotion affected the price of rice. As a result of his system, we have candlestick charts. Chart patterns can tell us a lot.
Each candlestick shows the emotions of traders from all over the world. Chart patterns do the same. We can see if traders feel, bullish, bearish or indecisive on a stock.
However, they aren’t a crystal ball into a stock’s direction. There isn’t a 100% fool proof trading method. Although, chart reversal patterns paint a clearer picture.
Most Reliable Chart Patterns Will Help…A Lot.
Every trader is looking for a leg up on the competition. We all want that edge so we can profit.
Isn’t that the goal of trading? We don’t sign up to lose money. Instead we want to make as much money as possible. Chart patterns can help us do that. My favorite patterns that I have found reliable over the years are cup and handles, ascending triangles, bear flags, bull flags and descending triangles. They aren’t 100% reliable but I have found them to be among the most.
In an industry where profit is everything, you need to learn and study the tools that can and will help you get there. Otherwise you’ll be apart of the 90% of traders that fail. Learn how to be a successful day trader.
That may sound harsh but it’s the reality unfortunately. Many times new traders don’t want to take the time necessary to learn chart patterns and how to trade them. They want profits fast. Knowing how to trade the most reliable chart patterns can help us get in and out of a trade before it’s too late.
The Reversal – Successful Chart Patterns
What is a reversal? According to the Cambridge Dictionary it is a complete change of direction, order or position. You’ve heard that saying “what goes up must come down” and visa versa.
The market trades in cycles. Which means stock are also going to trade in cycles. What goes down is going to go back up. What’s up is going to go down. They can, in fact, give us a signal of the impending reversal. You can also pair reversal chart patterns with moving averages for confirmation.
Just like when a bearish reversal happens. If you’ve been in a trade and bearish reversal chart patterns appear, you may want to consider closing out the trade.
Especially if you have profit. You never go broke taking your profits. Trying to hit it out of the park every trade is a mistake traders make. Which, in turn, causes them to lose instead of win.
You need to know how to trade candlestick chart reversal patterns to protect yourself. As a result, you’ll be able to find good entries and exits. We teach trading live of candlesticks within our trading service and trading rooms.
How to Learn Them
There are a ton of reversal patterns to learn. It can be overwhelming because it’s a lot to remember. My favorites are double bottoms, triple bottoms, V bottom reversals, falling wedges, morning stars. Where do you learn these? Well…
That’s why here at the Bullish Bears we developed our advanced candlesticks course. It’s got all the reversal patterns you need to know. You can take the course at your own pace. By the way, make sure you pace yourself. You’re filling up your brain with a lot of new information. You might forget where you left your keys or something like that when you start learning all this new stuff 🙂
The courses are packed with blogs and videos. So whether you’re a visual, auditory or a verbal learner, there is a way for you to learn. In fact, not only do we have our candlesticks chart patterns course, we also have a Candlesticks eBook available to you.
Check out the textbook reversal pattern the falling wedge and how it played out on $JD – can you see why knowing this pattern is important if you’re a reversal trader?!
The eBook has every candlestick and pattern as well as how to trade them. You can take it with you everywhere you go. So whether you’re getting an oil change or at the dentist office, you can study.
We even have candlesticks and most reliable chart patterns wallpaper. As a result, you can have that on your phone background, computer background or print them out to look at while trading.
How Do You Analyze Stock Chart Patterns?
- Candlestick by themselves tell a story. However, group them together and they form chart patterns. Those stock patterns help to analyze important support and resistance levels as well as direction. Knowing how to trade patterns is what traders who have the edge learn. While they’re not fool proof, they do help give a clear direction.
Check out the reversal pattern looming with $SPY here – notice the red candle at support. The chart pattern provides a good entry in several different points along the pattern.
It’s important to remember that patterns do break down. As a result, sometimes they don’t do what you expect of them. That’s why confirmation is key. When patterns break down it can be extra bearish or bullish, so watch for the next levels of support or resistance and be prepared.
Using technical analysis along with chart patterns can give you that confirmation. That way, you’re placing the best trade possible.
Remember that even the best traders fail 30-40% of the time. However, they learn to cut their losses quickly and get back in on a reversal pattern or a find a new entry. Hence why chart patterns are important.
Practice Trading Them to Be Successful
The most successful chart patterns have a lot to do with trading. Therefore, practicing how to trade candlestick chart reversal patterns is going to help make you a better trader. In fact, opening a ThinkorSwim account and placing hundreds of practice trades is the best way to go. You absolutely have to practice and prove that you can create a winning strategy in a stock trading simulator FIRST, before you ever risk real capital with trading or investing.
As a result, you’ll learn how patterns work as well as support and resistance. Then you can work out the kinks so when you go live, you’re prepared. Reliable patterns are only as reliable as your trading plan and risk management, You need to have the appropriate level of respect for trading to be a successful trader. If you need more training on chart patterns, our trade room is going to be the best place to hang out. Viewing how another trader’s see chart patterns is going to give you a lot of great experience to be ready to trade on your own.