Combining Price Patterns with Classical Technical Analysis & Indicators

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One of the advantages of price patterns is that they are very versatile, allowing you to combine or use them in conjunction with other trading tools or methodologies.

For example, if your main method of analysis is Elliot Wave theory, the continuation price patterns will help you analyse the different consolidation permutations, such as flags, pennants, triangles, etc.

If your main method of analysis is using classical technical analysis methods like trendlines, channels, support & resistance levels, the lines you draw on the chart will quite often encompass various price patterns, and knowing how to identify the patterns will give you an added edge.

If your main method is using technical indicators, then price patterns will help you add a visual dimension to your analysis.

For example, if the current price pattern is a rectangle pattern, then using oscillators might be useful because they can help you trade within the range, but if the pattern is a flag pattern, then you might want to avoid trading against the trend even if the oscillator gives an entry signal.

Another example, if your MACD gives a reversal signal, you can double-check your charts to see if there is any reversal pattern in the works, or any signs that one might be starting to form. So in a sense, they can both act as independent signals for confirmation, since one is mechanical and one is visual.

 

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