Patterns in forex trading

Forex trading has always been known for its fluctuations in terms of using currency pairs. Movement and consolidation is one of the characteristics seen in currency pairs in the sense that if the pairs aren’t moving, they consolidate and the pattern keeps repeating in this manner. This is where forex chart pattern comes in. Forex chart patterns are platforms that help to detect conditions where the market is ready to break out. These patterns can also indicate whether the currency price will continue in its current direction or not. They are a number of forex chart patterns which aids in making trading easy.

HEAD AND SHOULDERS TRADE PATTERN

The head and shoulders chart pattern is said to either be a topping formulation after an uptrend or a bottoming formation after a downtrend. A topping pattern is said to be an increase in price, and the price coming back to its original state. It’s said to be a higher price, retracement and then back to a lower price. The bottoming pattern is a decrease in price, followed by a retracement and then increases. The pattern becomes complete when the line connecting the topping and bottoming pattern gets broken. This pattern is considered tradable because of its ability to provide an entry level, a stop level and a profit target.

TRIANGLES TRADE PATTERNS

Triangles as chart patterns are very common especially on short-term time frames and these triangles can be symmetric, ascending or descending. These patterns appear to be a little different for trading purposes. Triangles usually occur when prices converge with the highs and lows thereby narrowing into a tighter price area.

ENGULFING TRADE PATTERN

Engulfing chat pattern is an excellent trading platform which can be easily spotted and its price action indicates a high and immediate change in direction. Engulfing in this term means that during a downtrend, an up candle real body will completely engulf the down candle real body which is called bullish engulfing while in an uptrend, a down candle real body will completely engulf the up candle real body and it is called bearish engulfing.

The engulfing trade chat pattern is tradable because its price action indicates a strong reversal since the prior candle has already been entirely reversed. The forex or currency trader has the ability to participate in the start of a trend while implementing a stop.

In conclusion, there are several trading methods that use patterns in price to find entries and stop levels. Chart patterns provide entries, stops and profit targets in a pattern that can easily be seen by traders using it.
 

 

 

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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