Technical analysts believe that stock prices often trade in patterns, as the motivating driver behind the movement of stocks is humans, and humans exhibit the same emotions when it comes to their money: fear and greed.
These two predictable emotions help create predictable trading patterns that technical analysts try to capitalize on.
Here are seven of the top bullish patterns that technical analysts use to buy stocks.
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One of the biggest drivers of stock prices is human emotions, particularly fear and greed.
Investors typically exhibit predictable emotions when a stock price moves up and down, and these emotions can lead to trading activity that creates predictable charting patterns.
Technical analysts attempt to take the emotion out of investing by solely relying on the patterns found within charts to trade stocks, potentially giving them an edge over investors who are susceptible to to making trade decisions driven by fear and greed.
While these patterns can be predictable, they aren’t bullet-proof. Head fakes, bull traps, and failed breakdowns occur often and tend to shake traders out of their positions right before the big move.
That’s why discipline is so important in technical analysis.
Having a plan before entering a position can help traders weather choppy price movements, increasing their chances of riding an uptrend and avoiding a downtrend.
A plan before entering a trade includes defining a “stop loss” level where if the stock falls to a certain price point, you automatically sell, take a small loss, and move on to the next trading opportunity.
A plan would also include a price objective where the trader would look to unload some if not all of the position to take profits.
Here are seven of the top bullish chart patterns that technical analysts use to buy stocks.
Read more: Bank of America says a new bubble may be forming in the stock market — and shares a cheap strategy for protection that is ‘significantly’ more profitable than during the past 10 years
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