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  1. #1
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    Jan 2018
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    Aspetta What is a Chart Pattern?

    Of the many technical analysis methods, arguably the analysis with Chart Pattern is the most accurate and simple reading of market price movements. The accuracy is higher than the traditional candlestick patterns, because it takes into account more candlestick formations. However, Chart Pattern remains simple because you do not need to use anything other than the price chart itself.

    The problem is that not many beginner traders know about Chart Pattern because they still rely on indicators as trading signals. In fact, most indicators are derived from price movements on the chart itself. Logically, if you can see the dynamics of the market directly with the naked eye, why bother with the pile of indicators?
    Let's explore the definition of Chart Pattern from the bottom first, so you understand the basic application.
    What is a Chart Pattern?
    In Indonesian, the meaning of Chart Pattern is the pattern of movement formations on the price chart. At a glance, from this understanding you will observe price formations as a hint to execute Market Order, whether Buy or Sell.
    Chart Pattern is a pattern of price charts that occur repeatedly, so the pattern can be used to predict where prices will move. Chart Pattern is very important in technical analysis, because in addition to detecting the direction of price, this pattern can also be observed in all timeframes, ranging from minute to monthly.

    Pattern Chart Variety
    Have you heard the term Triangle? Or Head & Shoulder? Or even never at all? Indeed, the notion of Chart Pattern varies. To be easy to remember, Chart Pattern is generally categorized into two kinds:

    A. Reversal Pattern (reversal pattern)
    This price pattern gives a signal that the price is likely to reverse from the previous major trend. That is, the price patterns in this category can signal early when you can sell at the highest price point or buy at the lowest price level. Very profitable, is not it?
    Double Top and Double Bottom
    This price pattern includes one of the price patterns with the highest occurrence frequency, because the formation is easily recognizable. The Double Top formation indicates that prices tend to slow down when it reaches its peak.
    Double Top is Bearish version of his, while for his Bullish version is Double Bottom.
    Triple Top and Triple Bottom
    This price pattern is a variant of the previous price pattern. The difference is, the accuracy of this pattern is slightly higher because the price indicates a strong reaction at the point of Resistance or Supportnya.
    Head And Shoulder
    The first and second shoulders are smaller in size than the head as an indication of the weakness of momentum to keep the price to its highest point (Head). As soon as the price starts looking through the neckline, you can execute the Sell order.
    Head And Shoulder pattern also has its Bullish version, Inverted Head And Shoulder.

    Falling Wedge
    The definition of Chart Pattern is quite simple; if the price has started looking conical downwards it means there is a potential that the price will turn up the hike. Falling Wedge also often appears on the price chart.
    Rising Wedge
    Simply put, this price pattern is the Bearish version of Falling Wedge. If the price pursed upwards, then there is the potential that the market will eventually respond with Sell-Off action.
    Rounding Bottom
    Compared to other reversal patterns, this one pattern is quite rare. The reason, the formation of Rounding Bottom requires a lot of candlestick, so we can be sure this price pattern is designed for long term trading.
    Bump And Run
    Chart Pattern is actually also quite often appear on the chart. Only, not many people recognize this pattern yet. In fact, the formation is simple and quite promising
    B. Continuation Pattern (trend forwarding pattern)
    Unlike the Pattern Reversal Chart patterns, this time the price pattern gives the signal that the trend will still continue despite a reversal. This is quite prevalent especially since market movements often experience a retracement.
    At a glance, the price formation of this pattern is similar to the Trendline Channel tool. True, Flag and Channel Trend patterns are often used by traders to keep track of potential breakouts from either the Resistance or Support (diagonal lines).
    Pennant pattern highlights the potential for price movement to break the price after the consolidation period. At a glance this pattern is similar to the Wedges pattern, but the difference is the degree of slope. Wedge pattern will be leaning in one direction, while Pennant pattern is almost symmetrical.
    Symmetrical Triangle
    This pattern also seems almost identical to the Pennant pattern, so what's the difference? In comparison, this pattern usually requires more candlesticks to complete its formation. For example Pennant can be formed from several candles only, then the Symmetrical Triangle pattern can eat two cali total candle to complete the formation.
    Second, compared to Pennant pattern, this pattern can be spelled out more "wishy-washy", because the price could be breakout up or down.
    Ascending Triangle
    Notice the difference between this Pattern Chart and the previous triangular pattern. In the Ascending Triangle pattern, the price pursed upward, but continued to collide on the same Resistance range. As soon as the price breaks through the Resistance, a strong Buy signal emerges.
    Descending Triangle
    When Ascending Triangle implies Buy signal. In contrast, the Descending Triangle pattern indicates a selling opportunity after the price has penetrated the Support.
    Well, if the price back and forth bounce, so it is not clear where the Top and Bottomnya, you could be encountering Rectangle price pattern.
    Cup With Handle
    Your thirst for profit? Feel the thirst by drinking extract from Chart Pattern with this cup-like shape. This price pattern is similar in shape to Rounding Bottom, but the difference lies in the presence of price consolidation on its "hold".
    Pros And Cons of Price Pattern
    Of course, like other methods, technical analysis using Chart Pattern has its advantages and disadvantages.

    a. Excellence Chart Pattern
    Technical analysis by observing price formation has major advantages in terms of practicality and simplicity. So if you were just relying on a stack of Indicators to get trading signals, you can now clear the chart view by selecting high-priced pricing formations.
    Regarding accuracy, Chart Pattern is known to be subjective. But if it is mastered, you can make trading decisions quickly only through observation of the formation of certain price patterns. Ideally, this method is effectively used by traders with a desire to filter trading opportunities on any pair and any timeframe, with a fast analysis process.

    b. Weakness of Chart Pattern
    Unfortunately, the greatest disadvantage of technical analysis with price patterns is its subjectivity. Between one trader with another trader can just depart from the definition of Chart Pattern is different, although the pair, timeframe until the broker is also exactly the same. Do not be surprised if one trader gets a Buy signal, but the other trader can instead signal the opposite on the same chart.
    The problem just happens if you use a reference price pattern from other traders as a trading reference without considering the personal trading system.

    First, certain price patterns require long holding times, such as Rounding Bottom which is generally intended for long term trading. Just imagine if you are a Scalper, floating minus accumulation might just shut you down earlier before the price reverses.

    Second, the accuracy of the price pattern depends on the discipline in following the criteria for forming a certain price pattern. There are some traders prefer the Chart Pattern identification technique freely, so there are some requirements somewhat deviated from the position should be. The goal is that he gets a signal faster at the expense of accuracy.

    Third, still with respect to accuracy, Chart Pattern signals can be combined with supporting indicators to improve their quality. Just keep in mind, adding a stack of indicators does not necessarily make the Chart Pattern signal accuracy to 100%.
    Is Trading Strategy Using Chart Pattern Suitable For You?
    Considering the advantages and disadvantages of Chart Pattern above, technical analysis using this subjective technique may be suitable for you if:

    A. You realize that trading signals are still at risk of failure. That is, you understand that no signal can guarantee 100% success. In this case, you need to apply money managerment to control the risk of failure, so that the total profit is greater than the accumulated losses.

    B. You prioritize speed and flexibility. The Pattern Chart identification process can be done quickly on a bunch of currencies to find the best trading opportunities. Free on any timeframe.
    Instead, do not force a trading strategy by observing price formations on the chart if you do not like the subjectivity of the Chart Pattern. For some traders, technical analysis using indicators of mathematical calculations (such as MACD, RSI, and Bollinger Bands) would be better because the indicators are more objective.
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