Pattern formations

This is the place where majority of trading mind is thinking, to decide whether to buy more or sell more. This big mind's oscillations results in price oscillations and in chart patterns.

Pattern Trading gives us consistent, profitable trades.

The world is chaotic. So is the market.The world is systematic. So is the market.

No two human beings, no two animals, no two plants or flowers are alike. But all the systems, which run in and around each species, each situation, bear similarities and have patterns.

Though no two days, two seasons or two years are alike, every day and night cycles, seasonal cycles, yearly cycles are systematic and accurate.

Though no two individuals are alike, all the cycles, for example growth cycles, learning cycles, respiratory cycles, heart beat cycles, etc; are systematic and repetitive.

The whole world is regularly irregular or irregularly regular.

If not for the accurate, systematic and repetitions, it would have been impossible to land on moon and visit distant planet and land unmanned vehicles on the distant planets to the accuracy of a millimeter.

In the unpredictable chaotic market, we get areas of predictable, repetitive formations, which we call patterns.

Once a pattern is forming, its future boils down to a predictable few directions or possibilities.

Just like for a vehicle crossing a circle or a crossroad with 100 roads joining, has 100 possible directions. But once it enters an avenue, its movement is highly reduced to a few, until it meets with another crossroad with multiple, huge number of possibilities.

With this analogy, if you understand the market, the pattern formations are like avenues, where the possibility of market movement reduces to a level, which we can handle or manage. We can trade them profitably.

These patterns may be continuation patterns. In a trending market, the stock prices rests for a while, before they continue their journey.

Or they may be reversal patterns. The trend, when exhausted, slows down, forms a pattern before they change their direction.

So these patterns alerts us as to the direction of the market. They provide us early signal either to book profit or make a new entry.

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