At the core of any reliable day trading system, is the ability to analyze price trends. Traders that use a day trading platform for their executions or thorough analysis when determining price action must use some form of Price charts to get the best results and to be most effective.
Price patterns work as one of the best technical indicators for discerning price action that reoccurs throughout a day trading session. The two primary types of price formations are either continuation patterns and reversal patterns.
Once a pattern is identified as consistent and predictable, the trader can move accordingly in deciding whether it is an opportunity to buy or sell. Savvy traders know you have to put in many hours of “chart time” to train your brain to recognize these patterns. However, day trading software can act as a shortcut in the price patterns learning process. While a computer is limited to understanding the outside influences that could be affecting the price of a trading instrument, the human mind has no limitations. Incorporating software analysis with outside influences like human behavior or news events can help you better interpret market movement and future price action.
For example, futures day traders use technical analysis to determine if the apparent reversal of a commodity is actually in play, or nothing more than a small correction. Using custom-made price action bars will increase your probability of determining current and future market movement. These types of trading tools should work well with a variety of commodity trades, as well as trading shares of stock or foreign currencies.
Understanding how to analyze price patterns successfully will allow any savvy trader to trade successfully under any condition, in any market. To be a successful long-term trader, it is imperative to learn some basic price patterns. Don’t get caught up in all the esoteric price patterns you may find on the Internet. All you need is to be familiar with standard price patterns such as Head and shoulders, Triple bottom/top, and Double bottom/top.
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