Scroll down to see a list of Internet sites that will provide an education about Chart Patterns.
There are many price and time chart patterns to study. The most common patterns are support and resistance levels, trendlines, double or triple tops and bottoms, retracements, cup and handles, head and shoulders, flags, triangles, and price channels, but there are many more.
The most important thing for us to remember when we use a chart pattern to enter an investment is that none of them predict the future reliably. That is to say they only work some of the time. Many of the patterns have a “confirmation” point, at which it is considered that the pattern becomes more reliable.
Many chart patterns need to be read in conjunction with the trade volume. For example, a pull back on declining volume is regarded as bullish, whereas a pullback on increased volume is not. Practically all charting software displays volume. Daily volume figures for the markets and individual stocks can be found at many sites.
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The Historical Prices section of http://finance.yahoo.com/ is a good source for the figures for daily open, low, high and close prices along with volume.
http://www.enthios.com/ in its Chartworks section has nearly two dozen different chart patterns that it explains. Its Chart Patterns Primer is useful because it show the top 10 bullish chart formations and the top 10 bearish formations with their average failure percentages. It explains that the percentages apply to formations once the pattern has been confirmed, which means that failure rates would be higher if the investment was entered before the pattern was confirmed. It is not stated how and when the figures were obtained which casts some doubt on the figures because it is rare for results of analyses like these to apply across all market conditions. Nevertheless the exposure of failure rates for chart patterns has to be commended.
http://www.stockcharts.com/ has tutorials on about 10 reversal patterns and a similar number of continuation patterns in its Chart School section.
In its Chart Reading 101 http://www.level2futures.com/ has simple illustrations that are easy to understand of more than two dozen chart patterns.
http://www.hardrightedge.com/ is well worth exploring, especially the Tactics - Traders Wheel section. It contains many articles, including “Bilateral Trade Setups”, which advises on overcoming directional bias when looking at charts, and “Playing Failed Failures”, which talks about the false signals a market can generate. For individual investors the article on “Trading the News” is essential reading – it says that by the time we hear the news it is too late to trade it, but we buy into that only for news that occurs to us unexpectedly. We believe that news, such as Fed announcements, that is planned in advance and reported real-time to individual investors can be traded.
A good site for education is http://www.equis.com/, a Reuters’ company that develops and markets Meta Stock. It has a copy of Steve Achelis’ book, Technical Analysis from A to Z, online.
Linda Bradford Raschke’s site http://www.lbrgroup.com/ has a 62-page booklet The Financial Analyst’s Handbook by Alan Shaw as a free download, as well as daily educational charts, her articles and guest lectures. The booklet is required reading for candidates seeking the Chartered Market Technicians certification.
http://clearstation.etrade.com/ also has a good education section for both beginners and more advanced investors.
http://www.esignal.com/ has extensive educational material including a weekly trading education article, a digest of one-pagers on Technical Indicators from Futures magazine, a Trading 101 newsletter and a Trading with the Masters section.
http://www.amateur-investors.com/ has an Investing Tutorial with information about chart patterns and indicators.
M and W patterns are explained at http://www.bollingeronbollingerbands.com/ along with methods of using Bollinger Bands.
http://www.finportfolio.com has a useful education section dealing with the broader picture, such as asset allocation, but oriented towards the use of its own tools.
http://www.elitetrader.com/ has some excellent training articles written by Charlie Wright. The articles deal with topics such as “Markets, Strategies and Time Frames”, “The Art of Strategy Design” and “The Path To Successful Trading”.
http://www.investmenthouse.com/ has hundreds of subscriber questions and answers that provide substantial education. Questions range from the basic but difficult like “How do I keep from selling too early” to the advanced such as “What do the suffixes –E, -A, -P on options chains mean?”
http://www.pristine.com/ emails a Trading Lesson of the Week and a Chart of the Week. Both are educational and often contain material that it is not easy to find elsewhere. The site also has educational reports and a free magazine that it distributes without charge.
http://www.leavittbrothers.com/ focuses on education for short-term trading for which, they point out, fundamental analysis is a fruitless endeavor. The site includes little under Free Stuff, but the Education section has a lot of free education.
http://www.guppytraders.com, an Australian site, has a considerable amount of free education mixed in with subscriptions and purchase items.
Information on the basic chart patterns is given at http://www.daisydogger.com/ which shows how to use Trading Techniques such as trendline breaks, moving average bounces, double tops, and MACD cross-overs.
The visitors section of http://www.coldstocks.com/ includes education on technical analysis, with explanations of stochastics, MACD, momentum and other common terms.
http://www.breakpointtrades.net/ has drawings of some basic chart types.
http://www.bullbearband.com/ has advice on the use of charts on its home page.
http://www.pring.com/ has educational movies in its Traders Den, covering topics such as “Trendline Construction”, “Basic Volume”, “Peak and Trough Analysis” and “Understanding and Applying Moving Averages”.
http://www.efuturevision.com/ has some chart patterns and indicators with limited explanations.
http://www.iqc.com/ has explanations of a couple of dozen chart patterns, candlestick patterns and technical indicators.
http://www.cgq.com/ has helpful explanation of 13 technical studies such as Bollinger Bands, Directional Movement Index, Fibonacci, Market Profile even though they are presented in the Customer Support section as lessons related to their software.
Although primarily about a software package the audio-video presentations on chart patterns at http://www.trackntrade.com/tour.htm are clear and easy to understand. They cover patterns such as Andrews Pitchfork, Gann Fan, and Head and Shoulders. They can also be accessed from http://www.thepitmaster.com.
http://www.rightline.net/ has a description of about two dozen candlestick patterns that they use.
http://www.chartsmarts.com/ explains a couple of dozen candlestick patterns.
http://www.tradingacademy.com/ covers a broad range of topics, though the free education is limited in its treatment of each topic.
http://www.tradingeducators.com/ has helpful explanations on how to detect trends, congestions, and other chart patterns.
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