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Access The Full Harmonic Trading Guide
Traders around the world analyze chart patterns to conduct accurate technical analysis. However, in order to be an expert at recognizing chart patterns, traders must resort to a great deal of practice and repeated exposure. It is only when a trader is able to recognize patterns that he/she is able to react according to altering market conditions.
In the world of trading, the patterns on the chart are categorized as reversal and continuous. These chart patterns can further be categorized as complex and simple patterns. With adequate knowledge about these chart patterns and properties, traders are able to react and take an accurate trading decision. Continue reading to find out the reason behind chart pattern formation and harmonic patterns.
Why Are Chart Patterns Formed?
The prices in the market reflect trend, consolidation as well as re-trend patterns. It is during the transitional phase that they witness trading ranges in addition to fluctuations in price. This range defines pricing patterns that are easy to identify.
The consolidation phases favor the prevailing trends on certain occasions before forming into a trend and later continue to move in their specific direction. Such patterns are referred to as the “Continuation” patterns such as the Flags and cups, Handle and Symmetric triangle.
Certain phases, on the other hand, cause the previous trend to reverse as well as continue to move in the reversal direction. For instance, Double Bottoms, Broadening patterns and Head & Shoulders patterns.
Harmonic Patterns-What You Need to Know?
Founded by H.M. Gartley in the year 1932, the Harmonics patterns as well as concepts of trading were later improved by Larry Pesavento using the concept of Fibonacci ratios.
The main concept behind the Harmonics patterns is the movement in time/price that adheres to the Fibonacci ratios and their market symmetry. The main reason for using the Fibonacci ratios is to determine the major turning points, extensions as well as retracements in addition with a number of swing low as well as swing high points. The projections as well as the retracements derived after using such swing points provides traders with main pricing levels for Stops or Targets.
In a nutshell, the Harmonics patterns offer trusted price entries, targets and stops related information. They can be easily combined with many other oscillators and indicators to take accurate trading decisions.