Trading Chart Patterns | Chart Types, Features & Benefits
Trading chart patterns are the key indicators of trading success. For both beginners and experts in trading, utilising chart types and chart patterns plays a pivotal role in making their decisions. Get a complete understanding of chart patterns on MintCFD – Your Trading Partner!
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Overview of Trading Chart Patterns
It was a Line chart, the simplest of all chart formats available now. Within a few decades, many other financial organizations adopted the line chart as their basis, while others formulated a new set of trading analysis charts depending on their needs and preferences.
By comparing with historical data, many experts formulated trading chart patterns that can help specify future price movements.
Who can benefit from using Trading Chart Patterns?
It is a misconception that trading analysis charts are helpful only for long-term investors. These trading chart patterns and types are quintessential for short-term traders too, as they can influence price movements more significantly.
Trading chart patterns are instrumental for all assets: stocks, forex, cryptocurrency, commodities and indices.
What is the Significance of Chart Patterns in Trading in India?
Before we explore further, let’s understand the significance of trading chart patterns.
1. Price Movement Analysis
The primary role of Trading chart patterns is to analyze and examine the price movements. Each rise and fall will determine whether to buy or sell a particular asset.
2. Trend Identification
There is always a streak of downward or upward movement in the financial market. It applies to an asset, a market or an industry. Bullish traders, as well as the Bearish traders, look for these charts to identify the trends and act accordingly.
3. Decision Making
Amateur traders rely on tips from Finfluencers or trading gurus on social media. Mediocre traders go with the peer group. On the contrary, expert traders count on chart patterns and make informed decisions.
4. Best for Technical Analysis
What asset to choose, which string to pick, when to buy and when to tell: all these questions are answered, and opportunities open up only through trading charts. Trading is all about ignoring what not to do. Chart patterns are the most recommended for technical analysis.
5. Combination of Data
Many professionals use a combination of different chart patterns and infer various data to conclude. Without this, every trade is a fluke. With this, every trade is a fruit.
What makes MintCFD Trading Charts the best?
On MintCFD, you have a plethora of trading guides and information. Regarding charts and patterns, we cover strategies for using trading charts, a glossary of all trading chart terminologies and historical data for the top assets.
- Real-time Updates
You can get real-time trading charts on MintCFD. Data delayed is data denied!
- Accessible to all Users
The trading charts are available for beginners and regular users of MintCFD.
- Available for all Assets
We provide these trading analysis charts for all the top assets on our platform.
Three Major Types of Trading Charts & How to Read their Patterns
If you understand the trading chart types better, trading chart patterns work wonders. Only if you comprehend all the aspects of charts can you get the necessary insights.
Candlestick Trading Chart
The detailed reading possibility feature of candlestick trading charts makes it popular among traders with varied portfolios.
History
The rich history of Candlestick charts dates back to the 18th Century. It is said to have originated in Japan.
- Munehisa Honma, the God of the Markets, created this chart. His entire Sakata’s Five Methods uses candlestick patterns.
- Though it was first introduced for the Rice Exchange market, it has become what we see today through various changes and adaptations.
How to read candlestick trading chart patterns?
Interpreting the candlestick trading chart patterns is relatively more straightforward for any trader. You only need to learn what represents what, where to find what and why each aspect is used.
Colour
The Red represents the downward movement, while the Green represents the upward movement.
Body & Wicks
The bigger central part is called the Body. The smaller or thinner line above and below the body is called the Wick. For one unit, you can find two wicks.
High/Low Price
The chart will indicate the highest and lowest prices of the specified timeframe.
Open/Close Price
Candlestick charts gain dominance through the intense depiction of Open and Close prices.
Bull or Bear Trends
Bull is when the closing price is lower than the opening price. Bear is when the closing price is higher than the opening price.
Time
Unlike other charts, you can see the timeframe legibly in Candlestick chart patterns. You can customize the view based on your needs.
Benefits of Candlestick Chart Patterns
Though Candlestick chart patterns have various advantages for trading, we have listed the most common benefits any trader can get.
Detailed View of Movements
You can get comprehensive data through different shapes and colors. It makes your trading research journey easier.
Market Sentiment Analysis
This chart pattern is a pictorial presentation of the battle between buyers and sellers. Hence, you find when and how long the traders were interested in buying or selling.
Pattern Recognition
Candlestick charts express various patterns at regular intervals. Reading those patterns lets you interpret the historical data and predict the future.
Who can use Candlestick Trading Chart Patterns?
Candlestick chart patterns have universal applicability.
- Those who are into Forex can make maximum use of this chart pattern without any doubt.
- Those who are into trading international stocks can also benefit from it.
- Those who are into CFD trading must try out Candlestick chart patterns.
- Both Day Traders and Swing Traders can utilize this.
- For Technical analysis, this is the most recommended chart pattern.
Bar Trading Chart
Due to their appearance, bar charts in trading are mini versions of candlestick charts. Most trading platforms use this chart and make this an everyday affair in the industry.
History
Bar Chart patterns existed earlier and gained popularity in the 20th century.
- The reason for its overwhelming reception is its sophistication in price bar depiction.
- Henry L Gantt is the one who used Bar Charts for various purposes and popularised them worldwide. There is not much clarity on records as to who formulated this chart.
How To Read Bar Chart Patterns?
The sole purpose of the Bar chart patterns is to track the price movements. Unlike the Candlestick pattern, Bar charts show horizontal lines representing open and close prices.
Color
The Red stands for downward movement, and the Green stands for upward trend.
Vertical Bar
The vertical bar represents the specified period’s High and Low prices.
Horizontal Bars
These horizontal bars represent the specified period’s Open and Close prices.
Length
The length in the Bar Chart Pattern is the most crucial indicator. It shows that the asset has more volatility during that day.
Price Levels
You can speculate on the asset potential by analyzing the opening prices in the historical data.
Benefits of Bar Chart Patterns
Bar chart patterns have a different set of advantages. Many leading educational institutions and masters of the trading industry use Bar chart patterns to explain trading.
Concise Data
Since the chart has a clean format, the data is concise and accurate for reading and analysis.
Stop Loss Order Decisions
Reading Bar Chart patterns is the key to faster decision-making for those who use stop-loss orders.
Volume Analysis
Many experts combine bar charts with volume to analyze asset volume and traders’ behavioral changes.
Who can use Bar Trading Chart Patterns?
Bar Charts are common among online traders.
- Bar chart patterns are versatile and can be used for all types of financial instruments.
- Long-term traders get the maximum benefit, though short-term traders can use it to the maximum.
Line Trading Chart
A Line Trading chart pattern is the most basic form of chart. It is a series of financial data points connected by a line.
History
Line chart patterns were first used in the 17th century for short technical analysis.
- William Playfair, who was later called the Father of Statistical Graphics, used the line chart in the 1780s and popularised it.
- He used it to show the Wheat prices in the market, and it was adopted in mainstream trading.
How to read Line trading chart patterns for trading?
Claimed to be the simplest of all chart patterns, Line chart patterns have their own downside. Even then, this is the most suggested pattern to follow to begin your trading journey.
Price
The line represents the closing price of the asset only. There is no high/low price mentioned. There is no opening price either.
Line Movement
If the line continues to leap or fall, it shows the volatility of the asset. If it stays still for a more extended period, you can assess the sentiment of the traders toward the purchase.
Colour
No time-based colors are given on the line chart; however, you can see whether it has grown or fallen during the specified time frame.
Overall Percentage
You can get an overall growth percentage of an asset for a specific time period.
Benefits of Line charts
Line charts are synonymous with simplicity. All you can see on the chart is the closing price, without any other metrics to deviate.
Easiest of all Chart Patterns
Line chart patterns are the easiest to read, and beginners love using the line chart.
Faster Trend Identification
There is only one data point, so identifying the market trend gets easier.
Higher Compatibility
Line trading chart patterns can be combined with any other chart for a better understanding.
Who can use Line Chart Pattern for trading?
It purely relies on trading style and behavior. Based on common trading psychology, we have listed who can benefit more from Line Chart patterns.
- Those who are new to trading and those who are using multiple chart patterns.
- Those who are into long-term investments.
- Those who follow or devise specific strategies instead of just following the market trends.
- Line chart patterns assist in both Technical and Fundamental analysis.
Top Trading Chart Patterns | 7 Patterns for 2024 Traders
There are various chart patterns to follow in the market. It is entirely subjective to pick a chart for trading purposes.
Depending on how chart patterns have consistently helped identify an upcoming trend in the past, we have collated the top 7 patterns to use in 2024 for your trading journey. The financial market has corrected itself in the recent past after the COVID-19 breakdown. The following list of chart patterns will help in making more informed decisions in the year 2024.
1. Head and Shoulders Pattern in Trading
This is one of the most recurring trading chart patterns and is recognized by traders across the globe.
- The head and shoulders pattern is also termed a reversal pattern.
- It is named for its visual resemblance: Two Identical shoulders and one high peak (Head).
- There is a Neck Line, from where the structure of Head and Shoulders are formed.
Two Types of Head and Shoulders Trading Chart Patterns
The distinction is simple, but it has two different connotations and responses.
- Normal Head and Shoulder Patterns express the growing movement.
- Inverse Head and Shoulder patterns express the falling movement.
Double Top Trading Chart Pattern
Double top chart patterns are similar to Head and Shoulders; but it consists of just two heads. Many experts believe that it consists of two shoulders without a Head. Either way, it follows a similar pattern.
- It has a neckline in the middle, representing a dip in the market.
- This is the most auspicious chart pattern among traders, as it can bring back fortune in a shorter span of time.
Double Bottom Pattern
This is just another variation of Double Top, with the only difference being that the pattern appears at the bottom.
- Double Bottom trading chart pattern stands for the downward movement of an asset value.
- This chart pattern is usually a hope-killer for traders, as it can quickly reduce the value of an asset.
- However, this is a happy sign for those who are into CFD trading if they go short.
Rounding Bottom Chart Pattern for Trading
Rounding Bottom trading chart pattern is a harbinger of profits in the market. This also comes under the Trend Reversal category.
- Rounding bottom consolidates the downward movement and assures an upward movement.
- It has happened multiple times for various assets after the COVID-19 outbreak.
- Experts believe that history repeats, and it applies to many of the assets that witness heavy downward movement in value.
Cup and Handle Trading Chart Pattern
Cup and Handle chart pattern in trading is an extension of Rounding Bottom followed by a slight slope after a rise in value.
- Traders wait for the price movements after the Rounding bottom just to see a handle.
- Those into CFDs, Futures and Options will always look for this pattern for better outcomes.
- It is a bullish pattern in motion.
- Cup and Handle also has an inverse variant, which results in a bearish pattern.
Ascending Triangle Trading Chart Pattern
Ascending Triangle chart pattern has resistance on both sides to create a triangle form. It keeps the market alive, making trading an unpredictable endeavor. Yet, if you understand this pattern, you can expect results in your favor.
- Ascending Triangle is a bullish continuation pattern.
- Once you understand the potential of an asset, this pattern will help predict when the value will come down or go up.
- Trading with derivatives and using ascending triangle chart patterns are a combination to be cherished.
Descending Triangle Chart Pattern
- Identifying and tracking the descending lows and descending highs are the key.
- The breakout confirmation happens only when the triangle reaches the flat lower line.
- Based on the data, a Descending triangle chart pattern usually has four triangles. (Plus or Minus 1)
How to use MintCFD Trading Charts?
On MintCFD, you can get all the major trading chart patterns, and you don’t need a special subscription to access these chart patterns. All you need is an active MintCFD account. Here is the step-by-step process to get your account on MintCFD.
Step 1
Click “Sign Up” on the MintCFD website.
Step 2
Register and verify with OTP.
Step 3
Your account is all set to begin your trading journey. Deposit the minimum amount of Rs.1000.
Step 4
Download the MintCFD app and log in using the same credentials.
Step 5
Explore all the major trading charts and all the top assets.
Concluding Thoughts on Trading Chart Patterns
Now you know the types of trading charts, their patterns and the top 7 trading chart patterns for 2024. It is time to pick a financial instrument and choose a particular asset. Keep these chart patterns handy for analysing any string on MintCFD.
