A Chart Pattern is a graphical presentation of price movement by using a series of trend lines or curves. The basic idea is to plot the price movement of a security, commodity, or index and then draw horizontal and vertical lines to represent the highs and lows over time.
Chart patterns are formed when the price rises above or falls below a previous high or low in an uptrend or downtrend respectively. The pattern is formed by connecting the highs and lows that form it with trend lines. This gives an indication as to where the price will either break through this resistance or support level.A chart pattern is said to be confirmed at completion if price closes above the zero line on the first day’s closing prices (for upward breakouts) or below it (for downward breakouts). The confirmation technique can be used to identify whether an anticipated breakout occurred and where it occurred within a larger pattern.Chart patterns have been used by traders since the early days of financial markets. In fact, chart patterns were first identified by Charles Dow in 1900, who described how stock market trends could be seen on a chart.The use of chart patterns has grown over time, as they helped investors identify trends in various markets such as stocks, commodities and currencies. Today, most major financial institutions use them on their trading floors to help traders identify possible trends before they happen.
