Using the right technical indicators is fundamental to successful day trading. But chart patterns that help make good swing trading and long term investing decisions may not be all that helpful when day trading commodity futures, stocks, or foreign currencies. Trading volume, support and resistance levels, short term moving averages, and Japanese Candlestick patterns such as the Doji or the Shooting Star are all useful for trading within the confines of a single trading session. These are chart patterns for day trading.

Best Chart Patterns for Day Trading

Chart patterns come in three categories, continuation patterns, reversal patterns, and bilateral patterns that indicate movement either up or down. A favored chart pattern for trading a bullish to bearish reversal is a head and shoulders pattern in which the price rises to three successive peaks, the first and third are lower than the second giving the appearance of a head and shoulders. Once the market has come to the “second shoulder” the odds are strong that the price will begin to fall. As with all of the best chart patterns for day trading, professional traders commonly look to other indicators they are using for confirmation.

Candlestick Chart Patterns for Day Trading

An ancient way to read markets goes back to Japan in the days of the Samurai, Japanese Candlesticks. Using candlestick chart patterns for day trading has increased in popularity over the last two decades because they are so easy to read. Common candlestick chart patterns for day trading include the hammer, Doji, morning star, evening star, and both bearish and bullish harami. Professionals caution candlestick trading novices to learn the basic candlestick chart patterns and become proficient in their use before moving on to the more advanced ones.

Flag Chart Pattern Day Trading

A flag chart pattern moves against the current price trend and gets its name because it reminds one of a flag on a flagpole. Traders use this pattern to spot a likely continuation of the prior trend when the market price has moved countertrend. This is a short term pattern and something that can be taken advantage of by the day trader. There are both bullish and bearish flag patterns made up of a preceding trend, a consolidation channel, a volume pattern, the breakout, and confirmation as the price action goes in the direction of the breakout.

Stock Chart Patterns Day Trading

Among bullish and bearish reversal patterns for trading stock there are the head and shoulders and inverted head and shoulders. The double top and double bottom chart pattern also fits in this category as do a rising wedge within an uptrend. Stock chart day trading patterns that indicate continuation of a trend include a falling wedge in an uptrend and a rising wedge in a downtrend. Bullish and bearish rectangles and pennants also fit in the continuation category as do descending, ascending, and symmetrical triangles.

Double Top and Double Bottom Chart Patterns Day Trading

When price trends reverse the reversal is commonly not abrupt. Rather the market “tests” the top or bottom of the trend, backs off, and then hits the extreme again before the reversal starts. When this happens at the end of a bull market it is called a double top and when this happens at the end of a bear market it is called a double bottom. Long term swing traders use this chart pattern to profit when the market pivots but day traders can also trade this indication of a switch in market direction.

Day Trading Forex Chart Patterns

Day traders can use the same chart patterns for trading foreign currencies as they do for stocks or commodity futures. Head and shoulders and reverse head and shoulders chart patterns are commonly used indicators as are triangles, both descending and ascending. For day trading, triangles are useful as they provide cues over a short time frame that are typically more useful to day traders who wish to enter, manage, and exit their trades within a single trading session.

ETF Day Trading Chart Patterns

An ETF or exchange traded fund is a pooled investment that tracks an index, commodity, sector, or some other asset and can be traded just like one trades a stock. As such, many of the same chart patterns used for trading stocks work for trading ETFs. These include double tops and double bottoms, head and shoulders and reverse head and shoulders patterns, and triangles. What is most important in using chart patterns is to take the time to learn the skills and become a benchmarked professional trader such as those who learn from DayTradeSafe.