CHART PATTERN FAILURE Paid Subscriber..?? Click Here Pricing Details..?? Click Here View Sample..?? Click Here Register Now..!!Click Here   We are all quite aware of price patterns and how they help us to identify market trends and confirm the status of the trend. Patterns generally occur either during market moves or at the end of a long advance or decline. Depending on where it appears, it will either reverse the previous move or continue the same. Patterns sometime are of the reversing variety and sometimes of the continuation variety. Sometimes, the same pattern can perform either of the two functions. We get some approximate trend targets once the resolution point of the pattern has been exceeded. Thus patterns are useful for deciding the current trend status, the future direction of the price move as well as finding targets for the future price moves.   But sometimes patterns won’t do what the crowd expects.   Probability underlies all prediction. Through skilled observation technicians anticipate future price movement and enter trades they hope will profit from it. But there are times when patterns do not come through as expected. A head and shoulder pattern where a neck line breaks but then does not move lower and instead, prices swing back into the original direction is an example of pattern failure. A triangle, which breaks out upward only to be followed by an immediate decline below the lower trendline is also an example of a failure. Rounding bottoms that do not convert into an advance but instead fall below 62% of the height of the pattern are yet another example of pattern failure. On the candlestick side, an absence of follow thru (i.e. confirmation) is a signal of pattern failure. One can use volume indications as a possible safeguard against failures. But the only way is to admit to the failure and square up the trade initiated on the first break.   It may be remembered that pattern failures occur in the penultimate stage of a trend. In other words, the next move after a pattern failure is often the final top or bottom (as the case may be). In this manner, pattern failures also give us trading signals- so much so that, sometimes pattern failures are better signals than the original pattern themselves!!   The classic Head and Shoulders reversal has been subject to intensive study over the last century. In fact, one popular investigation discovered this well-known pattern works only 79% of the time. While this figure lies well outside random outcome, it illustrates just how wrong you might be the next time you sell short at the H &S neckline.   This is why it is always prudent to have a strict money management plan in place to take you out of a trade with a small loss if it goes wrong. Even though many chart formations have a high probability of profiting if the breakout occurs, don’t drop your guard! Always determine how much you can lose if the pattern fails to follow through as expected. This way you will always be ready for the unexpected.   Reading material on this aspect of charts can be found in Schwaeger on Technicals by Jack Schwaeger (Book available thru our bookstore)   Anything in Technical Analysis- we have the answer!!!!