Like it or not, charts serve as an important tool for online traders and play a key role in technical analysis. You may generally look at graphs and numbers and feel a bit overwhelmed, but when you invest in shares, commodities, indices or forex in the form of CFDs, charts can be your best friends. They offer information, long-term insight and can potentially assist you in making trading decisions. Want to know more? Let’s start with the basics and build our way up.
Introduction to chart patterns
If the notion of charts leaves you hyperventilating, just think of them as visual representations of price movements; a picture of how the market, or a single instrument, moves. This “picture” offers plenty of information regarding market behavior – both past and future. A chart pattern is simply a specific formation on a chart that can be viewed as a trading signal, or as an indication of future price movements. Traders who employ charts – also called “chartists” – use chart patterns to identify trends and reversals and to decide whether they should buy, sell or wait.