Chart Patterns

smaller peaks), in addition to a neck line (line connecting the smaller points of the two holes and representing a support level). The neckline may be horizontal or inclined up / down. The signal is more reliable when the slope is downward than up.

The pattern is confirmed when prices break below the neckline after forming the second shoulder. Once this happens, the currency pair should start a downward trend. Soon, a sales order is placed below the neckline. To get the target, measure the distance between the highest point of the head and the neck line. That distance is approximately how far the price will move after breaking the neckline.

Note that prices often return to the neck line after the initial break (a “throwback”). In this case the neck line, which was a support, acts as resistance. 

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Head And Shoulders Inverted

The inverted head and shoulders pattern is exactly the opposite of the standard head and shoulders. It occurs at the end of a falling trend and indicates a bullish reversal.

Double top

The double top is also usually formed at the end of a bullish trend. It is one of the most common formations. The pattern is formed by two consecutive peaks of similar (or almost similar) height with a moderate pit between them. The neck line is drawn horizontally through the lowest point of a pit.

The pattern is confirmed when prices break below the neckline after forming the second shoulder. Once this happens, the currency pair should start a downward trend. Place a sales order below the neckline. To get the target, measure the distance between the peaks and the neck line. That distance is approximately how far the price will move after breaking the neckline. Once ruptured, the neck line begins to act as resistance. The throwback movement is also possible here.

Flags and pennants

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Double bottom

The double bottom is exactly the opposite of the double top. It occurs at the end of a falling trend and indicates a bullish reversal.

Similar patterns, with 3 peaks / 3 pits, are called triple bottom / bottom. The negotiations must be the same. 

Continuation Patterns in Charts

Patterns of continuation in graphs occur during a pause in the current trend and indicate that it will be resumed.

Triangles

Triangular patterns are easily recognized. The best way to negotiate them is to negotiate leaks. Negotiating within the triangle is riskier and requires experience.

There are 3 types of triangle patterns. The upward triangle is considered as a bullish pattern. The descending triangle is a bearish pattern, and the symmetric is a neutral pattern.

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In the case of a  symmetrical triangle , neither bulls nor bears dominate the market. The support line slopes upward and the resistance line slopes downward, at an approximately equal angle. The escape can be in any direction. One thing for sure is that it will eventually happen. As a result, you can place input orders above the highs lower and below the higher lows. When one of the orders is reached, cancel the other.

The upward triangle  shows bulls are getting stronger as they manage to push prices up a level while bears are weakening and allow prices to drop. The resistance line is relatively flat or horizontal, and the support line is inclined upwardly. In most cases, but not always, the price will flee beyond the resistance. Place an order of entry above the resistance line and below the highest casualties.

The downward triangle  shows that bears are getting stronger as they manage to push prices down while bulls are weakening and allow prices to rise lower. The resistance line is sloped downwardly and the support line is relatively flat or horizontal. In most cases, but not always, the price will slip beyond the support. Place an order of entry below the support line and above the lower ones.

Flags and pennants

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Pennants and Flags are short-term continuation patterns of which are among the most reliable.

These patterns are formed when there is a sharp price movement followed by a consolidation phase. A flag consists of 2 parallel trendlines (support and resistance) that slope against the previous trend. The Pennant consists of two converging trend lines that begin to converge and are very short. Symmetrical triangle.

Always trade Flag and Pennants in the direction of the previous trend placing orders above the resistance line (for uptrends) or support line (for downtrends).

Flags and Pennants are short-term continuation patterns, of which they are the most reliable.

These patterns are formed when there is a sharp price movement, followed by a consolidation phase. A flag consists of 2 parallel trend lines (support and resistance) that lean against the previous trend. A pennant consists of two converging trend lines, which starts wide and converges. It is a very symmetrical and short-term triangle.

Always trade Flags and Pennants in the direction of the previous trend, placing orders above the resistance line (for high trends) or support (for falling trends).

Wedges

Wedges are very similar to triangles. The difference is that the wedges have a significant slope against the previous trend.

An  ascending wedge  is formed when the price is consolidated between support and resistance lines inclined upwards. If the rising wedge forms after a bullish trend, it is usually a bearish reversal pattern. If it forms during a falling trend, it can signal a continuation of the fall.

A  downward wedge  is formed when the price is consolidated between support and resistance lines sloped down. If the downward wedge forms after a downward trend, it is generally a bullish reversal pattern. If it forms during a discharge trend, it may signal a continuation of discharge.

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Rectangles

The rectangle  describes a price pattern in which supply and demand appear to be evenly balanced over an extended period of time. The currency pair moves in a tight band, finding support at the bottom of the rectangle and reaching the resistance at the top of the rectangle. Prices will eventually escape this side trade. The leak will probably be up if the previous trend was bullish, and down if the previous trend was bearish. However, the rectangle may become a reversal pattern.

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