Double tops and double bottoms
Prepare for trouble and make it double!
As simple as it sounds - those patterns are defined with two peaks, one after the other on the chart. You see two peaks - you know the price will go the other way. As you can see on this little sample chart below, that’s what you should be looking for.
Two peaks - the price is supposed to go down. Two lows - the price is supposed to go up. Yes, it’s that simple!
Head and shoulders
Charts maketh man!
That one is just as simple. Look at that example chart over there.
See how it looks just like an outline of a person? Here you can see their head (the highest peak) and shoulders (2 peaks a bit smaller). Well, if you see this little silhouette of a man - it’s time for the trend to reverse!
It works in reverse as well - with head and shoulders turned upside down and the trend going up accordingly.
A pro tip for you: if you connect the shoulders with a so-called “neckline” and measure the distance between the top of the head and this line, that would be the approximate length of the price fall.
Wedge chart pattern
Drive a wedge between your losses!
Once upon a time, there was a price. It was small but kept growing up. Price’s candles became smaller, however, and the support and resistance lines started forming a wedge on the chart. Well, you can predict the ending of this fairytale.
Rising wedge shows the end of the uptrend - and it’s most likely time for the price to go down.
Will it work in reverse? Sure it will! Check out the example here:
Those three basic trading patterns will help you better understand charts and give you a hand with your future in investment!