Mastering Chart Patterns for Successful Futures Trading
At Futures Elite, we encourage you to learn chart patterns that will aid you in making commercial decisions for futures to maximize your potential.
Futures trading is intense and highly competitive, thus one of the simplest yet effective ways to gain an upper hand is to utilize chart patterns which forecast price movements based on previous market data analysis. Such tools significantly enhance a trader’s efficiency in making business decisions and greatly affect their account success.
What are chart patterns?
A chart pattern is a formation of the various shapes created as a result of the shifts in prices on a trading graph. It is safe to say that chart patterns are employed as basic indicators by traders in predicting the directions in which the market is likely to head. They are essential in assessing a trader’s emotions around the market, which in turn helps in determining market movements- be it up or down.
When a trader is able to identify a chart pattern, they are then able to determine the best point to buy or sell their shares, the right time to stop their losses and when to sell at a profit. This takes away the risks and offers the trader self-assurance which leads to effective long term trading.
Common Chart Patterns in Futures Trading
Head and Shoulders: Probably the most popular of all reversal patterns, the head and shoulders pattern provides information that an upward trend is about to be reversed into a downward trend. It has three peaks in it where one peak higher than others is situated in the middle called the head while the two smaller peaks are located on both sides and are the shoulders. It is a common practice in the head and shoulders pattern for traders to take action when the price breaks below the neckline, which is where the reversal is confirmed.
Double Top and Double Bottom: The double top is classified as a bearish reversal pattern, and it tells the market that the price has run into resistance and is meant to go down. When one talks of double bottom then that clearly suggests that the price has met some support and is sitting low but planning to go up. These patterns could assist traders in identifying whether important turning points in the market exist.
Triangles: Both ascending, descending, and symmetrical triangles are said to exist when the market is in a period of consolidation. Specifically, a symmetrical triangle depicts a wait-and-see attitude within the market. However, once the price moves beyond the boundaries of the triangle, then there is likely to be a large move in the direction of the breakout. These categorizations are good for predicting the direction of future price movement.
The Importance of Chart Patterns for Futures Traders
At Futures Elite, we acknowledge that the futures markets are fast-paced and being equipped with the right tools is of utmost importance. A chart assists in tracking price trends in the past and helps in predicting the future price. Having the ability to spot these patterns in advance allows traders to take advantage of the opportunity by targeting probable setups, determining risk and managing their trades according to the trend of the market.
Looking at chart patterns as well as other technical indicators like moving averages, RSI and MACD makes your trades even stronger. The more proficient you are at recognizing and understanding these patterns the more chances you have of having successful trades.
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