Chart Pattern Recognition is a discipline on its own, but it falls under the broader term of Technical Analysis because CPR is in some respect a technical analysis system.
There are many CPRs that exist. Here in subsequent articles, I will be presenting a few of them.
CPR techniques signal reversal of the stock, So they are used for this reason. All other indicators of technical analysis are used for following trends, on the other hand CPR is used mostly for trend reversal.
Just because CPR techniques may be difficult to follow, there may be an inherent risk in using them for predicting stock cycles, so alongside CPR indicators, usually protective stops are used as well.
Protective stops are automated means to exit, i.e. sell a stock if some reversal of the trend appeared before the indicators themselves signaled a stock reversal. We will talk about protective stops in other article/ s.
One way to describe CPR techniques is that they may be more volatile, i.e. more erroneous than traditional technical analysis indicators. Mostly they are used by "swing" traders rather than technical analysts, i.e. the stock is kept for the very short run.
There is the common belief that by themselves CPR techniques may present with errors, rather than follow the market directly and concisely, and also without protective stops, CPRs may not be worthwhile. This is the view that technical analysts argue.
On the other hand, CPR indicators may be fun to utilize and observed them as they require only some knowledge of trading stocks. Pattern observing in the market is interesting to follow and with protective stops placed at strategic points they can be a useful tool for either novice, or advanced technical analysts. The reason that CPRs may appeal to novice traders is because they are easy to spot, or work with and require little mathematics, or no mathematics at all. But, novice investors may not have the maturity, or ability yet to discern correct stock patterns, thus they may be liable to losses. On the other hand, advanced technical analysts may also want to work with pattern recognition so that they double- check on their results from mainstream technical analysis.
Thus, as a conclusion, CPRs may be a good tool for all kinds of investors. One additional aspect of CPRs when applied to stocks, is that they tend to be outside of the market for the longest run, and they only briefly create buy signals to enter the market, i.e. to purchase the stock. Because as I wsaid previously, swing traders may benefit more from CPRs, the reason is that buy and sell signals for CPRs are brief and thus for most of the time, they signal the trader to be outside the stock market, i.e. to hold no position. That is why those who try to utilize CPRs may change to become swing traders, i.e. those who may change position of the stock very frequently.
AS a conclusion, CPR techniques may bring good results, especially if they are used as a system of various CPRs in unison, i.e. various CPR techniques to be used to verify one another. Caution is needed though, i.e. to knowing also when and where to put protective stops, For protective stocks I will write another time in a different article.
There are many CPRs that exist. Here in subsequent articles, I will be presenting a few of them.
CPR techniques signal reversal of the stock, So they are used for this reason. All other indicators of technical analysis are used for following trends, on the other hand CPR is used mostly for trend reversal.
Just because CPR techniques may be difficult to follow, there may be an inherent risk in using them for predicting stock cycles, so alongside CPR indicators, usually protective stops are used as well.
Protective stops are automated means to exit, i.e. sell a stock if some reversal of the trend appeared before the indicators themselves signaled a stock reversal. We will talk about protective stops in other article/ s.
One way to describe CPR techniques is that they may be more volatile, i.e. more erroneous than traditional technical analysis indicators. Mostly they are used by "swing" traders rather than technical analysts, i.e. the stock is kept for the very short run.
There is the common belief that by themselves CPR techniques may present with errors, rather than follow the market directly and concisely, and also without protective stops, CPRs may not be worthwhile. This is the view that technical analysts argue.
On the other hand, CPR indicators may be fun to utilize and observed them as they require only some knowledge of trading stocks. Pattern observing in the market is interesting to follow and with protective stops placed at strategic points they can be a useful tool for either novice, or advanced technical analysts. The reason that CPRs may appeal to novice traders is because they are easy to spot, or work with and require little mathematics, or no mathematics at all. But, novice investors may not have the maturity, or ability yet to discern correct stock patterns, thus they may be liable to losses. On the other hand, advanced technical analysts may also want to work with pattern recognition so that they double- check on their results from mainstream technical analysis.
Thus, as a conclusion, CPRs may be a good tool for all kinds of investors. One additional aspect of CPRs when applied to stocks, is that they tend to be outside of the market for the longest run, and they only briefly create buy signals to enter the market, i.e. to purchase the stock. Because as I wsaid previously, swing traders may benefit more from CPRs, the reason is that buy and sell signals for CPRs are brief and thus for most of the time, they signal the trader to be outside the stock market, i.e. to hold no position. That is why those who try to utilize CPRs may change to become swing traders, i.e. those who may change position of the stock very frequently.
AS a conclusion, CPR techniques may bring good results, especially if they are used as a system of various CPRs in unison, i.e. various CPR techniques to be used to verify one another. Caution is needed though, i.e. to knowing also when and where to put protective stops, For protective stocks I will write another time in a different article.
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