Basics Of Chart Patterns
As an options trader, it is essential to be able to read and interpret charts. Are prices pointing to the upside or the downside? Are prices going to stagnate over the medium term? These are questions that option traders ask themselves all the time.
Technical analysis should also be used with fundamental analysis. Fundamental analysis will give a reliable picture of a company’s financial health in the long term. Technical analysis on the other hand will help one determine entry and exit points for the short term. Technical analysis will also help an option trader to determine whether a financial security is poised for a breakout or a reversal.
Do chart patterns actually help or hinder a trader? This is something that is definitely up for debate amongst option traders. But anyhow, we leave you to form your own opinion on this matter.
In this section, we will discuss relevant chart patterns such as:
- Support and Resistance
- Double and triple tops
- Double and triple bottoms
- Head and shoulders pattern
- Reverse head and shoulders
- Parallel trendlines
- Fibonacci retracements
- Volume action
- Moving averages
- Moving Average Convergence Divergence(MACD)
- Relative strength index
- Different time frames
As an options trader, you would want to get to know these chart patterns inside out.