A look at more Patterns
Support & Resistance
The above example speaks for itself. A support level is a price level where the price tends to find support
as it is going down. This means the price is more likely to "bounce" off this level rather than break through
it. However, once the price has passed this level, by an amount exceeding some noise, it is likely to continue
dropping until it finds another support level.
A resistance level is the opposite of a support level. It is where the price tends to find resistance as it is
going up. This means the price is more likely to "bounce" off this level rather than break through it. However,
once the price has passed this level, by an amount exceeding some noise, it is likely that it will continue
rising until it finds another resistance level.
Floor Trader Pivots are an important source of intra-day support and resistance. The FTP levels are calculated
each day based on the previous day's high, low, open and close:
Candlestick patterns are another source of patterns. They usually involve just a few bars.
You can combine patterns that are weak but frequent to make stronger ones:
Under no circumstances should you place your trade against the current price direction in anticipation that the market
is about to change direction. Picking tops and bottoms is a sure way to lose money.
Scott Tafel is the founder and principle partner in Falcon Trading Systems: computers for traders. He has
been a trader since 1999. Mr. Tafel spent 27 years working in the Nuclear power industry, principally as a
Nuclear Reactor Operator.