A chart pattern is a recognizable configuration or formation that appears on price charts, often used in technical analysis. Traders and analysts utilize these patterns to predict future price movements based on historical data.
Common types of chart patterns include head and shoulders, triangles, flags, and double tops or bottoms. Each pattern can signal potential trend reversals or continuations, making them valuable tools for decision-making.
Understanding these patterns typically involves not just identifying them, but also analyzing the volume and time frame over which they occur. Chart patterns serve as a foundation for many trading strategies within various markets, helping traders assess market sentiment and potential entry or exit points.