Top chart patterns you need to know

Guys let’s dive more into price patterns, now it’s time to show how some simple price movement could be the catalysts for some explosive moves in the market. When identified correctly, these chart patterns will help traders spot possible market tops or bottoms, as well as can signal traders into potential breakouts before they actually happen. There are many different Forex chart patterns accessible to traders. Because of so many patterns to select from, it’s little wonder why so many traders become confused as to which chart patterns would be best to trade. Among the hundreds of patterns available, there are a few that you need to know in order to improve your odds of success like a trader.

In this session we’re going to check out several common chart patterns. Some of these are reversal patterns and others are continuation patterns, however they all serve a precise purpose and could be very rewarding if dealt properly.

 

The Double Top & Bottom

 

double topDouble top chart patterns form after the good price rally or strong bullish conditions. It’s easily identifiable because the double top pattern appears like two hill peaks that form an ‘M’ shape on the chart.

Both peaks will normally be reacting by incorporating sturdy resistance on the market, showing the bulls can’t penetrate that level. The first bullish influx hits the resistance and bouchartnces straight off it, acquiring support after a market retracement.
Bulls eventually pick up steam again to push the market back into higher prices in which the market retests the resistance level. The bulls don’t have sufficient strength to break through the resistance, and price bounces straight off it again, making the second peak.

A double top pattern is really a classic sign of bullish exhaustion. The double top chart generally signals the market is getting ready to fall over. The containment line for that double top candlestick pattern is known as the ‘neckline’, and this is where the market found support after the first peak.

For a Double Bottom all rules are the same but market is trending down.

 

Head and Shoulders and Inverted Head and Shoulders

head and shoulders pattern

Head and shoulders are another market exhaustion chart pattern. This pattern is most dependable forming once the market has become trending within a certain direction for a while.
Let’s take a look at a fundamental head and shoulders chart pattern anatomy that forms over a bullish move.
As being the name suggests, the chart pattern consist of a head as well as shoulders. Normal head and shoulder patterns form on top of bullish trends, and just like the double top they signal bullish exhaustion.
The pattern is made once the bulls get a solid resistance level, retrace back and find support which creates the left shoulder. At this stage it’s impossible to tell if a head and shoulders chart pattern is forming.
When bulls pick-up strength again and fire price up-wards punching straight though the last tested resistance, however these higher prices can’t be maintained and price collapses back under resistance as the result of a false break. It’s the false break that produces the ‘head’ area of the chart pattern.
After the bulls didn’t maintain prices above resistance, they muster potency and efficacy and try again. Resistance holds and price falls back to support. This last phase creates the right shoulder and completes the head and shoulders pattern.
For Inverted Head and Shoulders all rules are the same but market is trending down

 

Bull and Bear Flags

flagsBull and bear flags, also called bullish and bearish flags really are a continuation chart pattern. This means that they typically break in the path of the former trend. They offer a terrific way to identify periods of consolidation in addition to opportunities to trade a breakout as the trend continues.
Flags form when the market retraces during trending conditions and therefore are used as trend continuation patterns. The counter trend movement produces a small channel, when price breaks the channel in the direction of the trend, the continuation trade is triggered.

 

Bullish and Bearish Triangles

Triangles are my favorite chart patterns, Triangles form once the symmetrical trianglesmarket stalls duration of indecision and starts producing higher lows and lower highs constantly. Eventually this HL LH patterns squeezes price into the tip of the triangle that inevitably results in a breakout. Many times you can see a perfect symmetrical triangle, which signals for perfect indecision between buyers and sellers.

 

Once price reaches the end of the wedge, there is a high operate a breakout will occur. Triangles are bilateral, which means they are able to breakout in either direction. So the classic way to trade wedge breaks is to buy breakouts out the top of the triangle and sell price breakdowns below the traingle.

Although there are countless Forex chart patterns accessible to traders, the patterns discussed within this lesson are the best and profitable.

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