Understanding Complex And Technical Patterns On A Trading Chart ...

Currency price movements, when plotted on a chart, form distinctive patterns. In order to define a technical chart pattern common points or lines are connected over a period of time. High and low and closing prices the line of points connect these. These charts will help you predict the currency?s possible movement with some degree of certainty.

It takes time for a beginning forex trader to identify currency chart patterns. Understanding market movement and pattern formation cannot be learnt overnight.

New traders may detect pattern formations too early, due to the thrill while placing trades too early based on pattern cofirmation that has not been confirmed which might lead to incorrect trading signals. As a result, an objective identification should be carried out to trade only reliable chart patterns. Most trading professionals will use a tool such as a forex trendline expert advisor that not only confirms the pattern but also insert an order on breakout once pattern formation is verified.

The wedge, Head and Shoulders, Channels, Descending Triangle and Double top are the five most important trading technical chart patterns in the currency trading

Wedge.

There are two variations on the wedge pattern. Wedge patterns are reversals which wedge between a patterns ends. A bearish reversal pattern and a bullish reversal pattern indicate the raising and falling wedges respectively
A pattern called a wedge is formed by connecting the high and low points of the candlesticks. The slope in the wedge pattern chart is indicated by the trend line that rises higher than the falling slope and vice versa.

A pattern indicated by head and shoulders.

As the name implies, the trading technical chart pattern reflects a head flanked by shoulders on each side. The head and shoulder chart pattern is formed when a trend line forming tow troughs and three peaks connects the highs of the candlestick Smaller price peaks are indicated by shoulders while the bigger price peaks are indicated by head. The chart pattern called head and shoulders is a bearish one. When a small descending triangle starts appearing,a favorable break in occurs for sellers.

The Descending Triangle Chart Pattern

The lower highs form a sloping upper trendline and the lows form a lower horizontal trendline both of which converge and a descending triangle with a bearish pattern is formed At the lower horizontal trend line a bearish breakout occurs

The Channel

Channels may be caegorized as ascending, descending or horizontal. Irrespective of which channel is seen on the chart, channels are defined in the same way For the time being,channels are defined as technical ranges with prices that have traded in.
When the price range trends upwards upwards channels apepars, when the range trends downwards falling channels are apparent and when the range moves sidewats a horizontal channel is seen.

It is called double top

Double top, is viewed as a brearish reversal trading technical chart pattern depicted by one trough which is associated with two successive peaks. The height of the peaks is very similar. A temporary support is given by the trough and a horizontal line forms the neckline drawn at this point

With the chart patterns the head and shoulders and the double tops patterns also display reverse patterns referred to as the Reverse Head and Shoulders, with Double Bottom patterns. To reiterate, traders are signaled that it?s a good time for buying or selling a particular currency pair by these trading technical chart patterns. With a forex trendline ea, traders will be able to plan ahead when these early signs of pattern formation are discovered and trading position to be inserted on automation upon full pattern formation.

These five currency trading patterns should help any investor steer through the sometimes unpredictable waters of the market.

Source: http://freefinancearticles.info/understanding-complex-and-technical-patterns-on-a-trading-chart

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