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Trading strategies uncovered: How to spot this common chart pattern and profit

by , 04 September 2015

Many traders use technical analysis. They use price charts to predict where the market is going to go next. And this can give these traders great profit making opportunities.

By studying price charts, you can look for clues on how to plan, enter and exit trades. Spotting chart patterns is one way to do this.

Let's take a closer look at one chart pattern that can lead to profitable trading…

The benefits of using continuation patterns in your trading

By learning to spot some key chart patterns, you can increase your potential for trading profits.

Continuation patterns are patterns that show when a price has paused for breath and trades sideways for a while before continuing its trend. Instead of trending strongly higher or lower, the price bobs about in a tight range.

Continuation patterns are useful if you missed out on the trend before. You have the opportunity to get into a trade as the trend resumes.

Trading flag patterns

One very popular continuation pattern is the flag pattern, Frank Hemsley in Profit Watch explains.

If the pattern is bullish, the price is in an uptrend, then trades sideways before continuing higher.

Take a look at how it appears on the chart below…

Chart showing a bullish flag pattern

You can see the period of consolidation before the price breaks out from this and resumes its upwards trend.

In this chart, the sideways action is sloping downwards. This is against the trend. This sort of move happens as the sharp move higher happened on high volume. As the volume ebbs it causes the price to fall.

This shows the sellers are taking over, but on low volume. The buyers should then return in high volume. This leads the price to break higher and the upward trend resumes.

You’ll see this sort of pattern appear in stocks, indices and commodities. And it’s worth keeping an eye on. You could make a nice profit entering the trade as the price moves higher.

There are also bearish bull flags. These patterns appear when there is a strong downward trend.

So there you have it. How to spot this common chart pattern and profit.

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Trading strategies uncovered: How to spot this common chart pattern and profit
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