Forex Basics | Technical Analysis

Forex Chart Patterns

In forex trading, technical analysis is reliant on the fact that history tends to repeat itself. The way to recognize these repetitions is through forex chart patterns alongside other methods. Forex chart patterns are diverse and for effectiveness, we will be discussing only the most common and accurate ones.

Forex chart patterns are recognized in the forex market to predict the next move of the market. There are two broad categories of forex chart patterns. These are reversal chart patterns and continuation chart patterns.

Forex Reversal Patterns

Forex reversal chart patterns are spotted at the end of a trend and they signal a trend turning. Recognizing them can be huge as you get to catch the new trend early on.

Examples

The double top/double bottom pattern

The double top pattern signals the reversal of an uptrend into a downtrend. It is of course spotted at the end of an uptrend. A double bottom pattern is an exact opposite. It is spotted at the end of a downtrend and signals the reversal of a downtrend into an uptrend.

Doouble top
Double bottom
Head and Shoulders/ Reverse head and shoulders pattern

The head and shoulders signals a reversal of an uptrend into a downtrend. The reverse head and shoulders signals the reversal of a downtrend into an uptrend.

Head and shoulders pattern

Forex Continuation Patterns

Forex continuation patterns occur midtrend during the resting phases of the market. These patterns signal the continuation of the preexisting trend.

Examples includes, pennants, flags and triangles.

Cup and Handle Pattern

The cup and handle pattern is a pattern that appears during an uptrend starts.

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Pennants

There are two types of pennants. These are the bullish pennant and the bearish pennant. The bullish pennant signifies the continuation of a bullish trend. The bearish pennant signifies the continuation of the bearish trend.

 A bullish pennant
Bearish pennant
Flags

There are also two types of flags. They are the bullish flag signifying the continuation of a bullish trend and the bearish flag signifying the continuation of a bearish trend.

Bullish flag
Bearish flag

In conclusion, chart patterns are a great way to analyze the market, with good accuracy.

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