A visual inspection of any stock chart will reveal that over time, prices do not always behave in a random or chaotic way but rather move about in stages, trends, congestion zones and sometimes repeating patterns. As buyers and sellers fight for control of the share price, the daily market forces of supply and demand shape the behavior of prices on a chart.
Certain patterns have a habit of re-appearing, time and again. The same patterns have been used by professionals to safely trade the market for over a hundred years. These patterns will continue to appear on charts because they are a manifestation of the basic underlying human psychology that’s always present in the market - the emotions of fear, hope and greed.
All successful trades begin with well timed entries. When’s the right time to buy? Only the market knows. Therefore, perhaps the best way to time your entries into the market is to use the market itself as your timing tool.
Chart patterns can signal a time to either buy or sell a stock. They provide the trader with a simple and straightforward way to enter the market, often with minimal risk. One advantage you have when trading patterns is that you can accurately measure both your risk and the expected profit target before entering the trade. Knowing these factors allows you to make informed planning that is a vital component of successful share trading.