How to use Chart Patterns to trade
Many people don't know that the charts that we stare at day after day actually follow a series of patterns. These patterns are like a book that can be read if you actually know how. The stories that the patterns tell us can at times foretell the future, in essence, if you understand what the chart patterns are trying to tell you, you will be able to know how the market will move.
There are many chart patterns, depending on your chart setup you could have candle stick patterns and get involved with things like "shooting stars" or "hang man" if you use line charts you will be exposed to a different set of fancy names and interpretations of how to read and use this knowledge.
While it is all well and good to be able to actually find out about the fancy names and see the chart patterns emerge, I think you will be more interested in knowing how to utilize this knowledge to better your trading profits.
One chart pattern setup is called asymmetrical triangle. It basically tells you that the market is starting to narrow. This means to you that buying and selling pressures are starting to equal. With this knowledge, add on some technical indicators to see if there will be a chance of a break out soon. Now I had cases when the indicators showed up blank but the charts were screaming at me. At that point in time, what would you do?
My honest suggestion would be to sit and wait. It is always better to have cash in your pocket, than taking a risk in the market that you are not at least 70% sure you might make money. So when you use chart patterns, always include in at least one technical indicator and also please base your trading on a general knowledge of the fundamentals of the currency's economy.
Chart patterns can help you increase the odds of a successful trade as they essentially give us traders a head up on how the market might move. Although there will be other factors to consider, chart patterns are still a solid basic that traders looking to make consistent profits must learn.