What are trend continuation patterns?

What are trend continuation patterns?  They are pattern that form in trending stocks.  These patterns indicate that the trend will most likely go higher.

What are trend continuation patterns?  They are pattern that form in trending stocks.  These patterns indicate that the trend will most likely go higher.

Not only do they indicate that a stock will head higher, but they will actually have a target at which stock should hit if it break out.  

Alright now I know what you are thinking.  These patterns that form in stocks, do they really work? Can it really be that easy?  The answer is, yes.  Trend continuations patterns are right the majority of the time.

I’m not saying that they will produce a profit all the time.  But most of the time they will.  There are 2 major reasons for that.  One people are already buying stocks that are in an uptrend and selling stocks that are in a downtrend.   Trend continuation patterns just tell you when to get into a trending stock.

The second reason for this is these patterns are already widely spread.  If you see these patterns form chances are that hundreds of thousand, possibly millions of traders also see it.  Most of these traders will probably buy or sell into it.

Now before you go out and buy into every one of these patterns that form you must remember it is important to keep your risk small.  Some patterns may not succeed.  In fact you could lose money on a trade like this.

That is why you have to use not only targets, but also stop losses.  These patterns will signal a buy when the stock breaks out of the formation.  If they go back into the formation it signals that the trend will probably fail. 

By setting a stop to get you out of a stock if it reenters the pattern you can greatly decrease your risk in the trade, while still keeping the potential to make a good profit.

For more information on what to look for with trend continuations visit http://www.stocks-simplified.com/chart_patterns.html

For more information on how to trade in the stock market visit http://www.stocks-simplified.com

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