Reversal Chart Patterns
Reversal patterns are those chart formations that signal the ongoing trend is about to change course. If a reversal chart pattern forms during an uptrend, it hints that the trend will reverse and that the price will head down soon. Conversely, if a reversal chart pattern is seen during a downtrend, it suggests that the price will move up later on.
Continuation Chart Patterns
Continuation chart patterns are those chart formations that signal that the ongoing trend will resume. Usually, these are also known as consolidation patterns because they show how buyers or sellers take a quick break before moving further in the same direction as the prior trend. Trends don’t usually move in a straight line, higher or lower. They pause, move sideways, “correct” lower or higher, and then regain momentum to continue the overall trend.
Bilateral Chart Patterns
Bilateral chart patterns are a bit more tricky because these signal that the price can move either way. A bilateral signal. This is where triangle formations fall in. To play these chart patterns, consider both scenarios (upside or downside breakout) and place one order on top of the formation and another at the bottom of the formation. If one order gets triggered, you can cancel the other one. Either way, you’d be part of the action. The only problem is that you could catch a false break if you set your entry orders too close to the top or bottom of the formation.