What is a cluster in trading patterns?

A cluster in trading patterns refers to a convergence of various signals at a certain price. This can happen when multiple technical indicators, chart patterns, or other analytical tools align at a specific price level, suggesting a significant area for traders to pay attention to. When such convergence occurs, traders may interpret it as a strong signal for potential price reversals or continuations.

For instance, a cluster can happen when resistance levels, trendlines, moving averages, and other indicators all converge at the same price point. This makes it an influential area, as it may lead to increased buying or selling activity due to heightened trader interest and psychological effects. Understanding clusters can provide traders with critical insights into market dynamics and inform their trading strategies accordingly.