Forex Trading is all about buying at low price and selling at high price. To accomplish this task properly, price movement and the trend reversals should be predicted correctly with high accuracy. For the prediction of price movement and the trend reversals, some classic patterns should be studied. Some of the classic patterns with short explanation are provided below you can learn them and use in your real Forex trading account.
This chart pattern is used to tell the trend continuations and the trend reversals. It is so named because this pattern consists of three rallies in which the middle one is always the highest and the two side rallies is always the lowest. This is the reason why the middle rally is named the Head and the side rallies are named Shoulders and so this chart pattern is named Head and Shoulder. This pattern signals the trend reversing either at the upside or downside. This chart pattern gives bearish trend reversal signals in uptrend and bullish trend reversal signals in the downtrend.
This chart pattern predicts the direction in which price of the currency move. This chart pattern is also referred as M/W pattern because M is observed in case of Double Top pattern and W is observed in case of Double Bottom pattern. Majority of the Forex traders and investors consider this chart pattern as the most reliable solution to predict the trend reversals. Double Top is formed when price moves to the level equal or nearly equal to the top level of first top and Double Bottom is formed when price moves downside and reaches equal or nearly equal to the bottom price of the first bottom.
This pattern has three peaks and all these happen to be at same or nearly same level. If the three peaks try to touch the resistance level then this is the Triple Top chart pattern and if the three peaks try to touch the support level then this is the Triple Bottom pattern. The Triple Top chart pattern ends when the price goes below the lowest point and breaks the support level and the Triple Bottom chart pattern ends when the price goes above the highest point and breaks the resistance level. These chart patterns are used to predict the reversal of long trends. Traders and investors are advised to open short position when the Triple Top chart pattern ends and open long position when the Triple Bottom chart pattern ends.
The Symmetric Triangle is the continuation pattern formed during a trend. At least two higher lows with two lower highs feature this chart pattern. Four points are needed to for this chart pattern. Out of the four points, first two are needed to draw the first trend line and the next two are needed to draw the second trend line. Second trend line is drawn because two trend lines are required to plot the Symmetrical Triangle. Symmetrical Triangle in this chart pattern is the result of connecting all the four points and the two trend lines converge if the points are extended. The point where the two trend lines converge is called the Apex. The price of any currency move between the two trend lines.
Mostly Ascending Triangles are the continuation patterns that are formed during an uptrend but sometimes these patterns may also be the reversal patterns. The traders and investors can get the bullish signals from this chart pattern in both cases of continuation patterns and the reversal patterns. The Ascending Triangle is a short term pattern that looks like the right angled triangle.
Mostly Descending Triangles are the continuation patterns that are formed during a downtrend but sometimes these patterns may also be the reversal patterns. The traders and investors can get the bearish signals from this chart pattern in both cases of continuation patterns and the reversal patterns.