With various approaches to trade currencies, common methods will always to a certain degree help you save a great deal of time, money and effort. Forex chart patterns combining with the latest information and indicators provided from time to time will give traders the accurate hints and clues about where the market is going next. With a number of chart patterns of varying complexity flirting in the forex chart patterns, it always comes two common chart patterns which occur regularly and provide a relatively simple method for trading.
No.1: Head and Shoulders (H&S)
The H&S pattern can be a topping formation after an uptrend, or a bottoming formation after a downtrend. A topping pattern is a price high, followed by retracement, a higher price high, retracement and then a lower low. The bottoming pattern is a low, a retracement followed by a lower low (head) and a retracement then a higher low (second shoulder). The pattern is complete when the trend line (“neckline”), which connects the two highs (bottoming pattern) or two lows (topping pattern) of the formation, is broken.
No.2: Triangles
Triangles are very common, especially on short-term time frames. While this Forex chart patterns appear slightly different for trading purposes there is minimal difference. Triangles occur when prices converge with the highs and lows narrowing into a tighter and tighter price area.
No.3: Ichimoku Cloud Bounce
Ichimoku overlays the price data on the chart. While patterns are not as easy to pick out in the actual Ichimoku drawing, when we combine the Ichimoku cloud with price action we see a pattern of common occurrences. The Ichimoku cloud is former support and resistance levels combined to create a dynamic support and resistance area. Simply put, if price action is above the cloud it is bullish and the cloud acts as support. If price action is below the cloud, it is bearish and cloud acts as resistance.
No.4 : Engulfing Pattern
Engulfing Forex chart patterns are excellent trading opportunity because it can be easily spotted and the price action indicates a strong and immediate change in direction. In a downtrend an up candle real body will completely engulf the prior down candle real body. In an uptrend, a down candle real body will completely engulf the prior up candle real body. The pattern is highly tradable because the price action indicates a strong reversal since the prior candle has already been completely reversed.
A good multiple of trading methods are utilizing Forex chart patterns in price to find entries and stop levels. Forex chart patterns, including the head and shoulders as well as triangles, provide entries, stops and profit targets for traders that can be easily seen. As a trader progresses, they may wish combine different forex chart patterns and methods to create a unique and customizable personal trading system that provide the most suitable ones to traders.
