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Butterfly Pattern

AnalyticsTrade Team
AnalyticsTrade Team Last updated on 26 Apr 2023

Table of Contents

What is a Butterfly Pattern?

A butterfly pattern is a technical analysis charting pattern that is used to predict potential price movements in the financial markets. It is a chart pattern that is formed when the price of a security moves up and down in a symmetrical pattern, resembling the wings of a butterfly. The pattern is used to identify potential reversal points in the market, and can be used to identify potential entry and exit points for traders.

History of the Butterfly Pattern

The butterfly pattern was first identified by Japanese trader Ichimoku Kinko Hyo in the 1930s. He used the pattern to identify potential reversal points in the market. Since then, the pattern has been used by traders and investors to identify potential entry and exit points in the market.

The pattern is based on the idea that when the price of a security moves up and down in a symmetrical pattern, it is likely to reverse at some point. This reversal point can be used to identify potential entry and exit points for traders.

Table of Comparisons

Pattern Reversal Point Potential Entry/Exit Point
Butterfly Symmetrical Yes
Head and Shoulders Asymmetrical Yes
Double Top/Bottom Symmetrical Yes

Summary

The butterfly pattern is a technical analysis charting pattern that is used to identify potential reversal points in the market. It is based on the idea that when the price of a security moves up and down in a symmetrical pattern, it is likely to reverse at some point. This reversal point can be used to identify potential entry and exit points for traders. For more information about the butterfly pattern, traders can visit websites such as Investopedia, TradingView, and StockCharts.

See Also

  • Head and Shoulders Pattern
  • Double Top/Bottom Pattern
  • Trend Lines
  • Support and Resistance
  • Moving Averages
  • Relative Strength Index (RSI)
  • Bollinger Bands
  • Fibonacci Retracements
  • MACD
  • Stochastic Oscillator

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