How to Trade Chart Patterns with Target and [email protected]

Forex Trading Books By forexgdp.com

1. ForexChartPatterns–forprofitabletrading
InForexMarket,thechartpatternplaysabigroletopredictthefuturemovementof
themarketinaneasyway.
OneofthemainpartsofTechnicalanalysisisChartPatterns.Itisaneasytrading
skillifyoupracticemorewithdifferentmarketcharts.BecomeProfessionaltrader
usingthebelowtechnicalchartpatterns.
♦HeadandShoulderspattern
♦Trianglepatterns
♦Pennants
♦Flag
♦Rectangle
♦Wedge
♦DoubleTop&DoubleBottoms
♦TripleTopandTripleBottoms
♦DisadvantagesofTradingChartPatterns
WhatareChartPatterns?
ThesetofshapeslikeTriangleshape,Rectangleshape,Dualtop,DualBottom,and
manyothershapesformedinthepricechartsisknownaschartpatterns.

2. AChartPatternshapesareprintedonallthemarketchartsatanytime.Traders
keepwatchingthepricecharttofindthepatterns.Oncethetraderfoundapattern,
thenitwillgivethesignalonwherethepriceisgoingtomovenext?
Thecomplexityoftradingnecessitatesakeeneyeandasharpmind,butonething
thatcanmakeiteasierforbothseasonedprofessionalsandbeginnersishavinga
tradingpatternscheatsheet.

3. Identifyingthepatternshapesinthechartisveryeasybyusingsimpletoolssuchas
horizontallines,trendlines,EquidistantChannellines,etc.Let’sseedifferenttypes
ofchartpatterns.
DifferentTypesofForexChartPatterns
ForexTradingpatternsaredividedinto3typesdependingonthemarkettrendsuch
asuptrend,downtrend,Neutraltrend(Ranging).
1)ContinuationChartPatterns
2)ReversalChartPatterns
3)NeutralChartPatterns
ContinuationChartPatterns
ContinuationchartpatternappearswhenthemarketismovinginanUptrendor
Downtrend.Youcanspotthispatternduringthepricecorrectionorretracement
happeninginatrendingmarket.
Forexample:IfthemarketismovinginanUptrend,thenitstopsatsomepriceand
startstomovedownwhichisagainstthetrend.Duringthistime,youcanidentifythe
continuationchartpatterns.
MostpopularcontinuationpatternchartsarePennants,RectanglesandCorrective
Wedges.
Pennants
Pennantsshapeformedinthechartduringthestrongtrend.Themarkettakesa
smallbreakduringthetrendanditformsapennantpatterninthechart.

4. Pennantlooksliketheshapeofthesymmetricaltriangle,asbothtriangleand
pennantareboundbytrendlinesupportandresistancelines.Thedifferenceisthat
pennantappearsduringthetrend,buttrianglescanbeformedduringbothtrends
andgeneralconsolidationperiods.
Pennantscouldbebearishorbullishdependingonthetrenddirection.Whena
pennantoccursduringatrend,ithasthepotentialtopushthepriceinthedirectionof
theoveralltrend.
Howtotradepennants?
WaitforabreakoutofthePennantpatterntoenterintothetrade.

6. Ifthepennantisformed,theminimumtakeprofittargetshouldbethenumberofpips
movedinthefirstwaveofthepennantasshowninthechartpicture.
Afterabreakout,thedistanceofthefirstwaveinsidethepennantshouldbeyour
minimumtakeprofittarget.
FlagPattern
Flagpatternissimilartopennantpattern.Whateverrulesappliedinpennantchart
patternappliestoflagpatterntoo.

7. Flagchartingpatternscanbeformedduringtheretracementofthetrend.
Theonlydifferencebetweenflagandpennantis,Flaglookslikeasmallchannel
(parallellines)inatrend.
RectangleChartPattern
Rectangleshapeformedinthechartwhenthemarketismovingupanddown
betweenhorizontalsupportandresistancelevels.Themarkettakesalongbreak
fromthetrendmoveanditkeepsmovingupanddownbetweenthecertainprice
level.

8. Duringatrend,whenthepricestartsmovingsidewaysformingarectangle,another
trendingmoveislikelytooccuroncepriceeventuallybreaksoutoftherectangle
formation.Thismoveislikelytobeatleastasbigasthesizeoftherectangle.
Rectanglescouldbebearishorbullishdependingonthetrenddirection.
HowtotradeRectangle?
YoucantakeshorttermtradesintheRectanglepattern.Ifthemarketreachesthe
bottomsupportoftherectangle,youcanplacebuytrade.Ifthemarketreachesthe
Topoftheresistance,youcanplaceaselltrade.

9. WaitforabreakoutoftheRectanglepatterntoenterintothetrade.

10. Note:Alwayskeepplacingthetradedependonthetrend.Example:Ifthemarket
movinginanUptrend,placeonlyselltradeafterbreakoutconfirmedattheBottom
SupportoftheRectangle.
Howtoconfirmthebreakoutintrading?checkhere.
Afterabreakout,thedistanceofthefirstwaveinsidetherectangleshouldbeyour
minimumtakeprofittarget.
WedgeChartPattern
Whenthemarketformshigherhighsandhigherlowsinanarrowpath,itisknownas
arisingwedge.Arisingwedgewillformeitherinuptrendordowntrend.
WhentheMarketformsLowerhighsandLowerLowsinanarrowpath,itisknown
asafallingwedge.Afallingwedgewillformeitherinuptrendordowntrend.

11. WedgePatternformsduringbothtrendcontinuationandattheTrendReversal.
TrendContinuationWedgeiscalledCorrectiveWedgePattern.
TrendReversalWedgeiscalledReversalWedgePattern.
HowtoidentifyCorrectiveorReversalWedge?
CorrectiveWedgepatternisacorrectionthathappenedduringthetrendwhichforms
aWedgeShapeintheChart.
ReversalWedgepatternissimilartoCorrectiveWedge,theonlydifferenceisMarket
willstarttoreverseafterformingthewedge.WhereasInCorrectiveWedge,the
marketstartstocontinuethetrend.
Wemaynotknowwhetherthewedgeiscorrectiveorreversaluntilitbreakoutfrom
thatwedgePattern.
Ifthebreakouthappenedinthetrenddirection,ThenwecanconfirmitasCorrective
Wedge.

12. Ifthebreakouthappenedagainstthetrend,itmeansmarketstartstoreverse.Then
wecanconfirmitasaReversalWedge.
HowtotradeWedges?
YoucantakeshorttermtradesinsidetheWedgepatternathighsandlowsofthe
Wedge.IfthemarketreachesthebottomoftheWedge,youcanplacebuytrade.If
themarketreachesthetopofthewedge,youcanplaceaselltrade.
WaitforabreakoutoftheWedgepatterntoenterintotheLongtermtrade.Stop-loss
shouldbeplacedneartohighsandlows.
Bonus:WedgePatternwillbreakoutmostlyatthe4thTouchoftheHigherHighor
HigherLow.Let’slookoutthisfallingwedgeChart.

13. Ihopeyouareveryclearnowonhowtotradethewedgepattern.Ifyouhaveany
questions,pleaseclickheretoasknow.
ReversalChartPatterns
DoubleTopPattern
ItisareversalpatterninanUptrend,wheremarketcreatesexactlytwotopsonthe
samepricelevel.

14. Thereare2typesofDoubletop
1)TraditionalDoubleTop
Ifeachtopgapiswithin9months,thenitiscalled“TraditionalDoubleTop”.
2)CyclicDoubleTop
Ifeachtopgapismorethan9months(or)Ifthetimetakentoformeachtopismore
than9months,thenitiscalledas“CyclicDoubleTop”.
DoubleBottomPattern
ItisareversalpatterninaDowntrend,wheremarketcreatesexactlytwobottoms
onthesamepricelevel.

15. Thereare2typesofDoublebottom
1)TraditionalDoubleBottom
Ifeachbottomgapiswithin9months,thenitiscalled“TraditionalDoubleBottom”.
2)CyclicDoubleBottom
Ifeachbottomgapismorethan9months(or)Ifthetimetakentoformeachbottom
ismorethan9months,thenitiscalledas“CyclicDoubleBottom”.
HowtoTradeDoubleTop?
Ifyousawadoubletopinthechart,waitfortheconfirmationofbreakoutatthe
recentlowlevel.
Afterbreakoutconfirmsattherecentlowlevel,Youcanenterintothetrade.

16. TheMinimumDoubleTopTargetshouldbethesameasthedistanceoftheprevious
hightolowasshownintheimage
HowtoTradeDoubleBottom?
Ifyousawadoublebottominthechart,waitfortheconfirmationofbreakoutatthe
recenthighlevel.
Afterbreakoutconfirmsattherecenthighlevel,Youcanenterintothetrade.

17. TheMinimumDoubleBottomTargetshouldbethesameasthedistance(size)ofthe
previousLowtohighasshownintheimage.
TripleTopandTripleBottomPatterns
TripleTopsandTripleBottomsaresameasDoubletopsandDoubleBottoms.The
onlydifferenceisadditionallyextraonetoporbottomformedinthechart.

18. 1)TraditionalTripleTop
IfeachTopsgapiswithin9months,thenitiscalled“TraditionalTripleTop”.
2)CyclicTripleTop
IfeachTopgapismorethan9months,thenitiscalledas“CyclicTripleTop”.
HowtoTradeTripleTop?
IfyousawaTripletopinthechart,waitfortheconfirmationofbreakoutattherecent
lowlevel.
Afterbreakoutconfirmsattherecentlowlevel,Youcanenterintothetrade.
TheMinimumTripleTopTargetshouldbethesameasthedistanceoftheprevious
hightolowasshownintheimage
HowtoTradeTripleBottom?

19. IfyousawaTriplebottominthechart,waitfortheconfirmationofbreakoutatthe
recenthighlevel.
Afterbreakoutconfirmsattherecenthighlevel,Youcanenterintothetrade.
TheMinimumTripleBottomTargetshouldbethesameasthedistance(size)ofthe
previousLowtohigh,asshownintheimage.
HeadandShouldersPattern
HeadandShouldersPatternisoneoftheTopReliablechartpatternsfortechnical
analyst.Itisastrongreversalpattern.Ifthesepatternsformedinthechart,Market
definitelyneedstoreverse.

20. Ifyoulookouttheimage,youcanseetheMiddleToplookslikeaHeadandeach
sidetopslooklikeshoulders.It’slikeaHumanright?
ThisisthereasonwecallthisPatternasHeadandShoulder.
ThisheadandShoulderpatternisaReversalPatterninanUptrend.
Buthowaboutthereversalofdowntrend?
Itisjustoppositeoftheordinaryheadandshoulderpattern.
IftheHeadandShouldersformedinthechartinanInvertedshape,itisknownas
“InvertedHeadandShoulder”.
ItlookslikeapersondoingYogaAshtangaHeadstand.

22. Ifyoufoundthisinvertedheadandshouldersshapeinthechart,itconfirmsthe
ReversalpatterninaDowntrend.
HowtoTradeHeadandShouldersPattern?
IfyousawaHeadandShouldersinthechart,waitfortheconfirmationofbreakoutat
therecentlowlevel(Necklevelbreakout).

23. Headandshouldersnecklineisusedtoconfirmthereversal.Iftheheadand
shouldersnecklinebreak,thereversalwillbeconfirmed.Afterbreakoutconfirmsat
therecentlowlevel(necklevel),Youcanenterintothetrade.Let’sseetheinverse
headandshoulderchart.

24. TheMinimumHeadandShoulderTakeProfitTargetshouldbethesameasthe
distance(size)oftheHeadasshownintheimage.
TrianglePattern
Triangleshapeformedinthechartwhenthemarketismakingconsolidationor
correction.
TheTrianglepatterntakesalongtimetobreakout,untilthatyoucankeepbuyingor
sellinginsidethehighsandlowsofthetriangle.
Thereare4typesofTriangle
1)AscendingTriangle
2)DescendingTriangle
3)SymmetricalTriangle
4)ExpandingTriangle

25. AscendingTriangle
AscendingTrianglehasHigherlows,Equalhighs.AscendingTriangleisformed
duringtheUptrendorretracementinadowntrend.
DescendingTriangle
DescendingTrianglehasLowerhighsandEquallows.DescendingTriangleis
formedduringthedowntrendorretracementinanUptrend.

26. NeutralChartPattern
SymmetricalTriangle
SymmetricalTrianglehasLowerhighsandHigherLowsinanarrowpath.
Symmetricaltriangleshavetwosides,whichareapproximatelythesamesizeand
thesameangle.Thiscreatesatechnicalforceequivalency,whichcreatestheneutral
characteroftheformation.Theimagebelowshowshowasymmetricaltriangle
appears:

27. ExpandingTriangle
ExpandingTriangleisoppositeoftheSymmetricalTriangle.ithashigherhighsand
LowerLows.

28. HowtoTradeTrianglePattern?
YoucantakeshorttermtradesinsidetheTrianglepattern.Ifthemarketreachesthe
bottomsupportoftheTriangleline,youcanplacebuytrade.Ifthemarketreaches
theTopresistanceoftheTriangle,youcanplacetheselltrade.

29. WaitforabreakoutoftheTrianglepatterntoenterintothetrade.
Let’slookouttheAscendingTriangleandDescendingTriangletakeprofittargets.

33. Howtoconfirmthebreakoutintrading?checkhere.
Afterabreakout,thedistanceofthefirstwaveinsidetheTriangleshouldbeyour
minimumtakeprofittarget.
Arethereanydisadvantageswhentradingwithchart
patterns?

34. Yesthere’ssomedisadvantagesofusingchartpatterns.
1)Watchingtoomanychartpatternsinthesamemarketchartcreatesmore
confusion.Itmakesyouthink,whetheryoushouldtradethispatternorthatpattern.
Forinstance,ifyoufoundthetrianglespatternandtherectanglepatterninthesame
forexchart,Youmaybeconfusedwhentoenterandexitthetrade.
2)Overdrawingonthechartpatternsdrivesyoucrazywhiletakingthedecisionto
enterthetrade.Stickwithone-timeframefirst,don’tdrawchartpatternsmoreonall
timeframes,itgivesyouideawherethemarketismoving.Butifyouwanttoenterat
goodopportunityearlieratbesttradesetup,youneedtolookforhighertimeframe
chartpatternsfirst,nextlookforlowertimeframechartpatternstoconfirmthe
reversalorbreakoutinthemarket.
3)Drawchartpatternsonlyatmajorpricelevels,don’tfocusondrawingpatternsin
minororunimportantpricelevels.

35. 4)Keepyourchartclearwhiledrawingthepatterns,ifyouuseindicatororother
forextradingtoolsinthechart.yourchartlookssomessyandbusy,itwillnothelp
youtopickthetradeattherightopportunityinsteaditmakesyourmindtiredandyou
maystarttotradeunconsciously.
5)Bewareoffakebreakoutswhiletradingthechartpatterns,don’ttakeanybreakout
tradeunlessthebreakoutisconfirmed.Wanttoknow,howtoconfirmthebreakoutor
avoidfakebreakoutintrading?Clickheretoseethebreakoutexamples.
6)Therearemoreadvantageswhencomparingtothedis-advantagesofchart
patterns.Tradeforexchartpatterncarefullyasperthestrategyon“Howtotrade
chartpatterns?”asexplainedabove.
7)Chartpatternsarenotcleartodrawusingthecandlechartswhencomparingto
thelinechart.
Conclusion
ForexChartPatternsareusedfortechnicalanalysistopredictthefuturemovement
ofthemarket.
Chartpatternsaredividedintothreetypes:
●ContinuationChartPatterns
●ReversalChartPatterns
●NeutralChartpatterns
Themostpopulartrendcontinuationpatternschartare:
●Flags
●Pennants
●Rectangles
●CorrectiveWedges

36. Themostpopulartrendreversalchartpatternsinforexare:
●DoubleTop/DoubleBottom
●TripleTop/TripleBottom
●HeadandShoulder
●ReversalWedges
●Ascending/DescendingTriangle

37. OneofthemostpopularneutralpatternchartsistheSymmetricalTriangle.In
Neutralchartpatterns,themarketmaybreakeitherupordown.Catchingthemarket
aftertheconfirmationofbreakoutgivesyoumoreprofitswithsmallrisk.
Alltheseforexchartpatternsaretradeddependonthereversalpricemovements
usingreversalpatternsandpricebreaksduringthecontinuationchartpatternforex.
ForexTradingTechnicalAnalysisgoteasierusingtheforexchartpatterns.Trading
chartpatternsareeasiertoidentifythefuturepricemovement.Whetheritis
continuationpatternsorreversalpatternsorneutralforexchartpatterns,alltypesof
forextradingchartpatternscomesunderthepriceactiontradingjourney.
Priceactiontradingisoneofthemostsuccessfultradingstrategiesinfxtrading.The
forexchartformationssuchasTriangleformations,Wedgesform,risingwedge,
fallingwedge,pricebreaksincontinuationpattern,headandshoulderschart
formations,reversalspatternconfirmation,priceconsolidation,doublebottomchart
patternforms,Triplebottomschartformation,Triangleformationisallnoticedalong

38. withthecandlestickpatternssuchasbullishengulfingcandlepricemoves,bearish
engulfingcandlepricemove,Morningstar,Eveningstar,pinbar,hangingman,Dojis,
tweezers,hammer,spinningtops,threeblackcrows,threewhitesoldiers,shooting
starareallthebestcandlestickpatternsforallpriceactiontraders.Thepricetrend
showspricedirectioninforexpatternschart.
Whateverforexchartpatternsdisplayonyourtradingplatform,Justfindoutwhich
typeofchartpatternitbelongstowhetheritiscontinuationpatternorreversalchart
patternorNeutralchartpattern.Afterfindingthepatterntype,youcantradebetween
thedemandandsupplyzoneforshorttermentryandexits,ifpricebreaksfromthe
pattern,youcanenterintolongtermtrades.
Theprogresstrackingofidentifyingthepatternandreviewingitoftenisvery
importanttobecomeaprofessionalforextrader.Practicecurrencytradingchart
analysiswellwithdemoaccountfirst,
Risingwedge,fallingwedge,necklineofheadandshouldersline,supportand
resistancetradingopportunitypointthetraderswithbesttradingsignalssetupinthe
chart.
Usingchartpatterngivesgreatbrowsingexperienceforexploringallcurrencypair
chartssuchasEURUSD,GBPUSD,USDJPY,XAUUSD,etc.Theperfectchart
formationisvisibleonlyifyoukeepdrawingthetrendlines,horizontalsupportand
resistancelevels.
Forlowrisk,highrewardtradingopportunity,thestartingpointofthepricemoveand
thepricedirectionshouldbepredictedusingthetrendsandthenecessarychart
formation.Thestoplossordershouldbesmallerandtighttoavoidexcesslossin
trading.
Checkthestoplevelofthebrokertoseehowmuchriskyoucantakewithyour
leverageoptiononyourtradingaccount.Somebrokersofferpartnercenterwithhigh

39. IBcommissionspleasebewareofthem.theyarestoplosshuntersduetohigh
spreadeveninmajorcurrencypairlikeEURUSD,USDJPY,GBPUSD.
Thestop-lossorderlineandtheasklineshouldbeenabledonyourforexbroker
platformtoknowthespreadandvisiblestoplossprice.
Forexchartpatterwithreversalchartandpriceactionstrategieshelpyoutotrade
importantcurrencypairssuchasEURUSDwithsmallriskandhighpotentialtrading
signaltomakegoodprofits.
Thereversalsandtrendprogressmarketcreatesheavydemandandmomentumin
themarketstobringbigmovementsandinsightsintotheforexcharts.
FAQ
WhatisCyclicDoubleTop?
Ifeachtopgapismorethan9months,thenitiscalledas“CyclicDoubleTop”.
WhatisCyclicDoubleBottom?
Ifeachbottomgapismorethan9months,thenitiscalledas“CyclicDouble
Bottom”.
Whichforexchartpatternsarebesttotrade?
Rectangle,Trendline,Channel,pennant,flag,triangle,risingandfallingwedge,
headandshoulderarethemostusedforexchartpatternsbyprofessionaltraders
worldwide.
Howtotradechartpatternsinforexmarket?
Firstidentifythepatternsinthechart.Ifthemarketisinsidethepattern,youcantake
shorttermtrades,ifthepatternshapegotbroken,thenyoucanplacealongterm
tradestocatchbigprofits.