TA attempts to spot past price patterns, which are reappearing in the current market. A knowledge of how these patterns are initially formed is the key to spotting them early and hence, the key to making the most profit from a timely trade entry.
Various patterns repeat themselves in different markets at different times, but the rules associated with each apply equally regardless of the asset being analysed. These patterns can be used to aid trade entry and exit, as well as enabling traders to accurately set stop-loss and stop-win levels. Examples of such price patterns are double tops, double bottoms, head and shoulders and inverse head and shoulders.
The chart of the Euro/US$ rate illustrates the 'double bottom'