Price patterns

When starting out in any market one must learn how to identify price patterns in order to make educated decisions on when to buy sell or do nothing. This will help take some of the randomness out of the movements in the markets. All markets have patterns that can be exploited to the astute trader or investor. Some of the patterns are double bottoms, triple bottoms, double tops, triple tops, rising wedges, falling wedges, head and shoulders at a top or a bottom of a move, cup and handle is another one that is very common in price action.

The famous Candlesticks.

Some more identifiable patterns are candlestick patterns, like dojis, hammers, morning star, evening star, most of these are possible reversals, or short-term pauses in the direction of the trend, and possible entry points. The Japanese candlestick charts have been a very popular charting tool for trading in any market it has been around along time and is here to stay.

Natures Patterns

All things on this planet have patterns, they might seem random, but they follow certain rules of the universe. When you take a scientific approach to the markets you will see this to be true. Just using some simple Fibonacci strategies and you will be able to see this for yourself, the trick is to know when to apply them. You can see Fibonacci throughout nature, just have a look at leaves in the forest there is a lot of the Fibonacci number sequences in them.

Clues about market waves

Looking at the wave patterns in the market, you can definitely see some wave counts that can help you determine if you are in the middle of a cycle, most people know five waves is a common cycle, if a market is going up it will likely have three waves up and two pull backs in a trend. The last spike in price is usually exaggerated and stands very clearly on your charts. That is usually the one that takes impatient traders money who are too early, and bet against the trend.

Pure price action to find hidden price patterns

One of the great things about watching raw price action is it's a leading indicator, no lagging at all. Like so many of the popular indicators like Macd, Moving averages, Bollinger bands, Stochastic and the list goes on. They do help to a degree, but they shouldn't be your main decision making tool, they are mainly a confirmation tool definitely not a leading indicator. Most beginners get hooked on these very quickly because anyone can see when two lines cross, I wish it was that easy everybody would win at trading. And we all know that wouldn't work either there has to be two sides to a market so one side can profit from the other side, I guess that goes back to the laws of the universe.

The reality is price action should be first on your list to learn when trying to trade any market, take your time and study your charts carefully for hidden gems in the price patterns.

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