The formations, figures or technical patterns are drawings in the graphs of quotes, which can be classified into different categories and have a predictive value. The study of trends states that there are three types: uptrends, downtrends and lateral trends.
Contrary to common perception, most of the trend changes in price occur in a gradual transition period. These transition periods are often identified as lateral trends . However, these transition periods may not be a sign of a turnaround, but a mere consolidation in the price before proceeding with the previously observed direction.
There are two types of formations: the reversal formations and formations, which are use in digital trade management.
The reversal formations, as the name implies, are those that indicate that a change of direction in the price trend is happening. Formations suggest that the market is taking a breather before continuing down the same path. It is obviously essential that the technical analyst to differentiate from each other as soon as possible during the training phase.
Setbacks are price movements against the main trend of the price. Trade is expected to back up a considerable portion of the original motion and find support or resistance at certain predictable levels before continuing its move in the previous direction.