Use Chart Patterns To Trade Efficiently

There are two ways to trade in the stock market: fundamental analysis and technical analysis. Fundamental analysis is all about researching a stock by evaluating its financials, balance sheets, cash flows, and fundamental metrics before investing in it. Fundamental analysis of a stock is done to invest in the stock for the long term whereas technical analysis is all about identifying entry and exit by analyzing price trends or chart patterns. Studying chart patterns is the most effective way to trade in securities. In this article, we are going to learn about how to use a trading account, how to open a trading account, how chart patterns work, and how to trade in the share market using chart patterns.

What are chart patterns?

The share market opens from 9:15 AM to 3:30 PM and during this trading hour traders, long-term investors, institutional investors, other financial institutions, etc trade in the stock market. Chart patterns are a concise picture of all the buying and selling occurring in the stock market. In short, they are graphical representations of price movements of security in the past. You can get a clear picture by analyzing the trendline of a stock. The popular chart patterns used by traders are flags and triangles.

Popular chart patterns that are used to trade in the share market

Double top: Double top pattern is an indication of a trend reversal of security. Traders tend to sell security when they see this pattern.Double bottom: Double bottom pattern is an indication that the security price has reached the level of support and from this stage, it will rise again. A double bottom pattern is a buy signal for traders.Ascending triangle: Ascending triangle indicates that the security will move in an upward direction. You can draw the pattern by placing a straight line through the swing highs.Symmetrical triangle: Symmetrical triangle can be an indication of a downtrend or uptrend, depending on the market conditions. The symmetrical triangle can be created by joining lines along the lower highs and higher lows.

To conclude, chart patterns are used while trading in the stock market and it is an important tool to find trades. With the help of technical analysis, you can earn short-term profits. Study various aspects of technical analysis such as candlestick patterns, price action, technical indicators, and chart patterns to trade effectively in the share market. Make sure to open a Demat and trading account that charges a low brokerage and is suitable for doing active trading. Also, you need to keep in mind that using chart patterns to trade in securities doesn't guarantee returns on every trade. Sometimes the trade may work and sometimes not. So, always use stop loss while placing trades in the share market.

 

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