Top 5 Chart Patterns Every Bangladeshi Trader Must Master

Many say that the trading market is dangerous because it’s volatile. But what makes it even scarier is its unpredictability. You never know in what direction the market will move in the next hour, let alone the next day or the next month.

Among many reliable strategies to crack the code of the trend movement patterns are the most sought-after. Because, in the financial world, some events repeat. Mostly because how buyers and sellers react to them remains constant to some extent.

So, a deep insight into those patterns adds an edge to traders, making the market look familiar. This article outlines 5 common chart patterns, which will reassure you while surfing a rather unusual market.

Let’s dive in.

The Head and Shoulders

Head and Shoulders is one of the easiest technical chart patterns to notice. Exposing a steep bullish move, it becomes a treasure trove for short traders. In this pattern, a breakout turns a bullish market into a bearish one, making the market open to leverage.

You can identify the Head and Shoulders by

• The price, making a lower resistance, falling, and touching it three times within a short duration
• The first price fall makes the left shoulder, and the last one makes the right shoulder. In between, the price reaches its highest point, creating the head.
• The right shoulder’s low point triggers the downtrend.

How to Leverage: Once the Head and Shoulders is confirmed, expect a steep bear. Entering into a short position is the best move, where you should set a stop loss near the breakout line of the pattern.

Double Top and Double Bottom

Another reversal pattern that can go both ways. In a double top, you see the price making two consecutive rounding tops, where the former one positions itself a little lower than the first one.

This means the price has already reached its highest once and reverted to test its potential, and is currently struggling there. If confirmed, it’s an evident sign of a great bear. The double bottom is exactly the opposite, just happens to bearish line, predicting a bull.

How to Leverage: Double Tops and Double Bottoms are tricky. So traders must wait until confirmation. Double Tops, by initiating a bearish market, becomes a good short position. While Double Bottoms are ideal long position markers.

Flags: Bullish and Bearish

Flags highlight a specific length of a trend, where the price shifts become noticeably consolidated. It means the ups and downs create multiple tops and bottoms, almost equal in size, making clear resistance and support lines. The price usually continues the course it was on before a flag. That’s why it’s often called a continuation pattern.

You can identify a flag by

• A sloping reverse consolidation
• Followed by a straight bullish or bearish line, called the Flagpole

How to Leverage: Flags are a short rest taken by the market before following the old path. The consolidations reveal its struggle to make a strong decision on the price. And they mostly break out in a reversal, which mirrors the old market. Traders should wait until the flag reaches a breakout.

Triangles: Ascending and Descending

Triangles are made of a constant resistance line and a sloping support line. The name of the triangle depends on the direction of the slope. An ascending triangle has an ascending support line, whereas a descending support line makes a bearish one.

How to identify:

• The price consolidates without picking up for a new high
• The support continues, pushing the price till the breakout
• The price leaps or falls at a high rate, getting out of a triangle

How to Leverage: Giving out clear signs of a strong trend, triangles come as a great opportunity for both long and short goers. Whenever the price crosses resistance, focus on the market volume. Whether it rises or falls, make a decision in the market’s favour.

Cup and Handle

It looks on the chart just like what its name suggests. A curve rallying over a certain region of the price chart, creating a rounded and expanded “U.” And at its end, you will see a short protrude, made of a short consolidation. Together, they look like a cup with a handle.

It’s a continuation pattern that signals an imminent uptrend.

How to Leverage: Save some money to invest whenever you see a cup. You will find the breakout at the resistance line of the handle.

Wrapping Up

Patterns are something you can’t avoid if becoming an advanced trader is all you want. The ability to detect and confirm a pattern is sometimes the biggest difference between a novice and an expert trader. In that sense, you can measure your level as a trader by the number of patterns you can identify for sure. Learning common chart patterns spares you from surfing safely when the market is most profitable.