The Bottom Line
Chart patterns often look great in hindsight and foresight (as they are forming), but the breakouts don't always act as expected. The price could continue to move sideways resulting in multiple false breakouts, or it could fake traders out, breaking out in one direction and then quickly moving the other. A stop loss order placed on each trade helps limit the risk when events like this occur. Consider the risk/reward on each pattern before trading it as well. Based on the profit target and the stop loss, the trade should provide more potential profit than potential loss. |