How to identify these patterns to make money in the market
Thank you for reading today's blog post on the importance of recognizing patterns in the market. These patterns are amazing technical analysis tools that billion and million-dollar institutions utilize to take profits and understand their impact on prices.
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Tools are the technical analysts' way of crafting a clear picture of the markets that fit their thesis, strategy, and backtesting. We are always searching for easy and simplified ways to understand the markets and how we can take action on the stocks we hold. By letting the charts do the work for us, we can maximize our profits.
Patterns, combined with tools, are a powerful way to predict human behavior in the markets. The buying and selling of anything that has a price (equities, bonds, commodities, or even Crypto) is bought, sold and plotted on a chart will show us the patterns we utilize to make the best decisions in the market.
Imagine being a million-dollar portfolio hedge fund manager or even a trader with a $100,000 account, with a significant position in Bitcoin that you started acquiring at the beginning of this year.
How would I know when to start taking profits or be aggressive by adding more to my core position?
In other words, should step on the gas (and shoot for the moon) or start applying the breaks (before the market becomes too volatile).
Chart patterns are like a third-base coach ready to signal to the player when they can round the base and head home for the score! They indicate when you're about to round the bases. Bitcoin recently gave us the signal as a trade, and it kept us long, and then we took profits last week (+90%).
An ascending triangle pattern is a bullish chart pattern that is formed when the price of a stock forms a series of higher lows but is unable to break through a strong resistance level. The resistance level is usually a horizontal line that connects a series of highs. As the price continues to approach the resistance level, the buying pressure increases. When the resistance level is finally breached, it can lead to a significant price increase.
Traders often use this pattern to identify potential buying opportunities or to place buy orders when the price breaks above the resistance level. However, as with any trading strategy, there is always a risk of losing money in the stock market.
It's essential to note that technical analysis, including chart patterns such as the ascending triangle, is just one tool that traders use to make trading decisions. Other factors such as company financials, market trends, and news events should also be considered before making any trades. Additionally, it's crucial to have a solid understanding of technical analysis and risk management principles to effectively use these tools in trading.
An ascending triangle can be a top or a continuation pattern for a stock or asset. Continuations tend to be more frequent, though. Let's review the five characteristics that define this pattern:
An upward price trend leading to the pattern.
A horizontal resistance level that acts as significant resistance.
A cluster of price periods that tend to trade within a definable range.
A pattern that tries to breach the horizontal resistance level several times.
A breakout of the range into the upward end of the range.
NOTE! This can become a bearish trend reversal when price fails to break above the horizontal line and breaks back below the diagonal trend line. This is very BEARISH, indicating to the trader that it's FAILING to break upward.
I hope you enjoyed Part 1 of this 2 Part Series! Next, we'll discuss descending triangles!
Be sure to follow me on my private feed (@wizdaytrader) be on on the lookout for tweets of new charts showing this price behavior and look out for our next post. Thanks for reading and remember to trade confidently!
Essex Trading Quote of the Day (#EsxQotD)
“I always believe that prices moves first and fundamentals come second.”
~ Paul Tudor Jones
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