Day 12: Chart Patterns
How do you trade chart patterns like the pros?
Don't trade based on incomplete patterns:
The biggest trap beginner traders fall into is assuming a pattern is complete before it actually forms. Don't enter a trade just because the pattern "looks" like a head and shoulders; always wait for a break of the neckline and a candle close outside the pattern.
How to determine the price target (Profit Target):
In a head and shoulders pattern: Measure the vertical distance from the highest point of the head to the neckline, then project this distance down from the breakout point to determine the initial profit target.
In a flag pattern: Calculate the length of the "flagpole" and project it from the flag's breakout point.
Confirming a breakout with a retest (Retest):
The same principle of role reversal applies here; when the neckline or pattern boundary is broken, it's best to wait for a small corrective move to retest the broken levels, reducing risk and improving the reward-to-risk ratio.
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How do you trade chart patterns like the pros?
Don't trade based on incomplete patterns:
The biggest trap beginner traders fall into is assuming a pattern is complete before it actually forms. Don't enter a trade just because the pattern "looks" like a head and shoulders; always wait for a break of the neckline and a candle close outside the pattern.
How to determine the price target (Profit Target):
In a head and shoulders pattern: Measure the vertical distance from the highest point of the head to the neckline, then project this distance down from the breakout point to determine the initial profit target.
In a flag pattern: Calculate the length of the "flagpole" and project it from the flag's breakout point.
Confirming a breakout with a retest (Retest):
The same principle of role reversal applies here; when the neckline or pattern boundary is broken, it's best to wait for a small corrective move to retest the broken levels, reducing risk and improving the reward-to-risk ratio.
$WDCB $WBETH $WLFI
#BlackRockCryptoAssetsJump63%
#SouthKoreaPlansTighterCybersecurityRules