| Chart patterns give you buy and sell signals that can | | | | If you buy a random stock hoping it will go up you |
| make you profits and help you limit your losses in the | | | | will not know if you are right or wrong until you |
| stock market. But what makes them work so well? | | | | either make money or the stock goes down to $0. |
| Chart patterns work because of psychology. Take | | | | This could take years and give you a headache. |
| the rectangular patterns, this pattern occurs when a | | | | However with chart patterns you can figure out if |
| stock is bouncing back and forth between 2 levels | | | | you are wrong easy and fast. If the stock breaks |
| for a while and then breaks either up or down. | | | | back below $45 and continues in its old range we |
| For example let's say we find stock XYZ has been | | | | could assume that we were wrong and decide to |
| bouncing between $35 and $45 for 1 month. Finally it | | | | exit for a small loss. |
| breaks up to $47. This indicates that the stock has | | | | 2. They give you targets |
| broken out its trading range and will most likely | | | | Another great thing about chart patterns is the fact |
| continue to go up. | | | | that they actually give you targets to shoot for, this |
| When people see this their greed takes over and | | | | gives you a basic strategy on when to get out. That |
| they buy as much as they possibly can. This buying | | | | way you do not end up giving back your profits if |
| forces the stock to go up even higher. That is the | | | | the stock turns against you. |
| reason that these buy signals work so well. | | | | 3. They give you buy signals |
| In addition they also offer great trading signals | | | | If you can find a breakout you can find a buy signal. |
| because. | | | | This stops you from having to guess the best time |
| 1. They let you know when you are wrong. | | | | to enter a stock, because the chart tells you. |