Chart Patterns - How to Trade Chart Patterns

Chart patterns are graphical representations of repeating price action formations that are commonly used in the analyzing of online Bitcoin trading market.

Chart patterns is one of the studies used in technical analysis to help traders learn how to recognize these repeating chart formations.

These chart patterns are important in Bitcoin trading because when the market is not moving in a particular direction it is forming a chart pattern. It is important to know these formations so as to have an idea of what might be the next move in the Bitcoin price movement.

When Bitcoin price movements are plotted on a chart there are several formations that occur naturally and repeat themselves over and over again. These formations are used by a lot of technical analysis traders to predict the next likely market movement.

Traders often study these chart patterns and formations to gauge supply and demand forces that form the basis for Bitcoin price fluctuations.

These patterns are classified in to 3 different categories:

1. Reversal chart patternsDouble topsDouble bottomsHead and shouldersReverse head and shoulders

2. Continuation chart patternsAscending triangleDescending triangleBull flag/pennantBear flag/pennant

3. Bilateral chart patternsSymmetric triangle - ConsolidationRectangle - Range Market

Reversal chart patterns - these reversal chart patterns confirm the reversal of the market price trend once the chart pattern setup is confirmed. These patterns are formed after extended market trend either upward or downwards and they signal that the market is ready to reverse the direction.

Continuation chart patterns - these continuation chart patterns are formations that set up the market for a continuation move in direction of the prior market trend. These continuation chart patterns are formed when the market is taking a pause before continuing in the same direction of the previous Bitcoin prices trend.

Consolidation chart patterns - these consolidation chart patterns form when the market is taking a break before deciding the next direction to take. When these chart patterns are formed the market is trying to decide which direction to trade.

Technical Analysis of Charts

There are two types of chart analysis, these two might seem similar but are not: the two are:

Japanese Bitcoin Trading Candlesticks Patterns - Study of a single candlestick - Read Japanese CandlesticksChart Patterns - Study of a series of candlesticks formations

(This tutorial is about the second option above - chart patterns)

The different topics for these two types of chart analysis are: