24 Forex Pattern You need To Know
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The most important of the chart patterns is a head and shoulder pattern; it is
a bearish reversal pattern. This pattern provides an entry point and a stop
loss; the take pro
This pattern is a bearish reversal pattern; the price makes a swing high at
Top A. The price retraces back and then moves higher again to Top B but
fails to create a new high, higher than the previous swing high. The price’s
failure to make a higher high makes the price fall back to the neckline.
The neckline is a horizontal line connecting the base of the lowest point of
retracement point between point Top A and Top B.
The formation of both the tops A and B and the break below the neckline
completes the pattern; a clear break of the neckline provides the best
entry point and indicates the current trend’s reversal. The stops are placed
above the previous swing high; profits can be booked at a reward double
A is a bullish reversal pattern; it is the opposite of
the double top pattern and is often traded by new and advanced forex
traders. The confirmation of the pattern is the break of the neckline after
the formation of the double Bottom A and B. Stops can be placed at the
swing low of Bottom B and profits can be booked at double the risk.
double Bottom pattern
The double top and double Bottom patterns are generally referred to as
“M” and “W” patterns.
Triple tops and are an extension of the double top pattern and is a bearish
reversal pattern. The formation of three consecutive tops and the price
break below the neckline confirms the pattern completion.
The entry point is upon the neckline’s break, and the risk is calculated
towards the swing high C, and profits can be booked at a 1:2 risk and
Triple bottoms are the opposite of the triple top pattern and is a bullish
The rounded top pattern is a bearish reversal pattern. While in an uptrend,
the price fails to keep moving higher and stalls around the highest highs,
then retraces by making consecutive lower highs signaling the uptrend’s
weakness. Price also makes consecutive lower lows, and prices start to
move lower, visually creating a rounded top showing the price reversal.
The pattern completes once the price breaks the neckline.
The rounded Bottom pattern is a bullish reversal pattern and is opposite of
the rounded top pattern. It is traded once the neckline is broken and the
stop are placed at the lowest low of the curve, while take profits can be
placed at a reasonable risk and reward ratio.
The ascending triangle is a bullish continuation pattern formed by
connecting two trend lines. The first is a flat trend line or a horizontal
trend line, while the second one is an ascending trend line or a rising
trend line. The intersection of both these trend lines forms a rising
The pattern is completed once the price breaks above the triangle. The
stop loss can be placed at the previous swing low within the triangle and
take profit levels can be set with 1: 2 risk and reward ratio.
Descending Triangle pattern is a bearish continuation pattern. Traders
expect the prices to continue the trend after a brief pause in the
movement. These patterns provide the best prices to book partial profits
and to add more positions in an existing trade.
A falling wedge pattern is a bullish reversal pattern. The pattern consists of
2 falling trend lines, with prices moving within the trend lines. The trend
lines converge each other but do not join to form a triangle at the current
market price scenario.
A break above the upper falling trend line A completes the pattern, and
the trend is validated by a close of the candle above the falling trend line A.
Stops can be placed below the previous low with profit targets with a 1:2
risk and reward ratio.
A rising wedge pattern is a bearish reversal pattern. The pattern is formed
by two rising trendlines, converging in the end but not forming a triangle.
Entry is confirmed once the prices break below the rising trend line B,
with stops above the previous high, the profits can be booked with a good
risk and reward ratio.
Pennants are continuation patterns; depending on the formation within a
trend, they can be classified as bullish or bearish.
The above picture M shows a rising pennant pattern. The pattern is formed
when prices while in a uptrend tend to stay within the trend lines and show
consolidation due to traders’ partial profit booking. The consolidation
phase is marked by the price staying within the trend lines, forming a
The pattern is validated once prices break above the pattern with a candle
close above the trend line. Prices tend to continue in the direction of the
previous trend after completion of the pattern.
A falling pennant is a bearish continuation pattern formed during a
downtrend. The prices should be in a downtrend, and the pattern has to be
formed within the downtrend. The consolidation phase, once broken, will
lead to the continuation of the current trend.
Pennants are mostly formed during a trend and could be traded by new
and experienced traders. The pattern tends to form frequently and provide
good additional entry points. Many traders add multiple positions to ride
the trend more profitably.
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