GLOSSARY

FORMATION

26 May 2017 By PDSNET

The discipline of "technical analysis" or "charting", as it is sometimes called, consists of studying chart patterns with a view to establishing patterns that can be used to improve prediction of future price movements. This subject can be broken into three areas:

1. Formations
2. Line Charts
3. Wave and cycle theories

There are many different types of formations which occur commonly in financial charts. For example, double tops and double bottoms usually signal a change in the direction of the trend. The head and shoulders formation and its opposite, the reverse head and shoulders formation usually indicate respectively a protracted downward or upward move. To get a clearer understanding of the various formations and how to interpret them you should refer to the module on formations in the course material.

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