analyzing chart patterns to improve your forex trading

Analyzing Chart Patterns to

Improve Your Forex Trading

TYPE OF CHART PATTERNS

• There are three main types of chart pattern classifications in Forex technical charting.

• Trend Continuation

• Trend Reversal

• Neutral

TREND CONTINUATION

• The trend continuation chart

pattern appears when the

price is trending, and we

typically expect the breakout in

the direction of the trend.

TREND REVERSAL

• Trend reversal chart patterns appear at the end of a trend. When you see a reversal chart formation when the price is trending, expect a possible correction.

PENNANT• The pennant is a corrective

consolidating price move, which appears during trends.

• It resembles a symmetrical triangle by shape, as both are bound by trendlinesupport and resistance lines.

RECTANGLE• The rectangle chart pattern

resembles price consolidation

within horizontal support and

resistance lines

WEDGES• We have a rising wedge when the price

closes with higher tops and even higher bottoms. We have a falling wedge when the price closes with lower bottoms and even lower tops.

• Wedges could be a trend continuation or trend reversal formation

DOUBLE TOP• We have a double top pattern when after

an uptrend the price creates two tops approximately at the same level.

• We have a double bottom pattern when after a downtrend the price creates two bottoms approximately at the same level.

HEAD AND SHOULDERS

• Head and shoulders are a reversal formation and indicate a topping reversal after a bullish trend.

• After an uptrend, the price creates a top, then it corrects. It creates a second, higher top afterwards and then it drops creating a third, lower top

INVERTED HEAD AND SHOULDERS

• The inverted head and shoulders typically appears after a bearish trend and calls for a bottom in price.

• After a downtrend, the price creates a bottom, then it corrects. It creates a second, lower bottom afterwards and then it drops creating a third, higher bottom.

SYMMETRICAL TRIANGLES

• Symmetrical triangles have

two sides, which are

approximately the same size.

ASCENDING TRIANGLE

• The Ascending triangle has tops, which lay on the same horizontal line and has higher swing bottoms.

• The descending triangle has bottoms, which lay on the same horizontal line and lower swing tops.

TRADING CHART PATTERNS

• Trading price action using

chart patterns is a simple,

effective way to trade the

markets.

Check out the “IN DEPTH”

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