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Chart Patterns: How To Trade Them

March 25, 2015 by Dominic Walsh Leave a Comment

A double peak is a form of trade that was formed after there has been a re-ascent. The peaks are formed when price hits’ a certain level, which can’t penetrate. After the failure at this level, the price will bounce back a bit, and then will go back to again try to pass that level. If the price down again at that level, then you have a double peak. On the chart above you can see that the two peaks formed after a strong upward trend. You may notice that the second peak could not penetrate the height of the first peak. It is a strong sign that will appear crafts, because it tells us that the buying pressure at the end. When we have a double top, set to an order under the edge of the door because we consider and Crafts uptrend. If you look at the chart, you can see that the price broke through the edge of the door and began to move down. Remember, double peak trend trades. It will look after you find that there is a strong upward trend. The market tends to fall faster than it grows, it usually means that the faster you make money when you sell or lose if you are on the wrong side.

chart patterns

Double bottom is also the formation of turning the trend, but this time we will open the purchase order, rather than for sale. These formations occur after an extended downtrend when forming two valleys or bottom. You can see from the graph above that, after the previous downward trend, price formed two valleys because she could not go below certain level. You may also notice that the second bottom could significantly penetrate the level of the first floor. This is a sign that the sales pressure almost finished, and there will be a turnaround. In this case you should enter an order over the edge of the door. You can see from the graph above that, after the previous downward trend, price formed two valleys because she could not go below a certain level. You may also notice that the second bottom could significantly penetrate the level of the first floor. This is a sign that the sales pressure almost finished, and there will be a turnaround. In this case you should enter an order over the edge of the door.

chart patterns

The symmetrical triangle formation on the chart where the line of the highest prices and lowest price lines converge together to the point where they look like a triangle. During this formation happens that the market produces lower peaks and higher bottoms. This means that neither buyers nor sellers are not pushing prices far enough to achieve a clear trend. If this is the usual battle between buyers and sellers, this is a draw. This type of activity is called consolidation. On the chart above we can see that neither buyers nor sellers have failed to push the price in their direction. When this happens we will get lower peaks and higher bottoms. When the two slopes come closer to one another, it is expected break-out. We do not know in what direction, but we know it will come to the break out. In the end, one side will be surrendered. So how would we be able to take advantage of this situation? Easy. We can set tasks above the line and below the top of the lower line of a higher bottom. Since we know that the price will break through, we can easily set tasks regardless of market direction. As you probably guessed, the drop-down triangles are exactly the opposite of an ascending triangle. In descending triangles there are a number of lower peaks that make up the top line. The lower line is the support that the price can’t penetrate. See that in order to gradually lower price points that tell us that sellers are now receiving battles as opposed to buyers. In most cases, the price will break the line support and will continue to fall. However, in some cases support line is too strong, so the price will bounce and strong will to progress upwards. The good news is that we do not care where the price goes. We only know that it will go somewhere. In this case, we set the tasks above the upper line (lower peaks) and below the line support. This formation occurs when there is a level of resistance and higher bottom line. It will happen that will be a certain price level that buyers can not move. However, they gradually started to push prices up, as evidenced by a higher bottom. That customers are now receiving power, because they’re higher bottom. They keep the pressure on the level of resistance and as a result, a break out will happen. The question is in which direction? Will buyers be able to break the resistance level or will be stronger? Most books will tell you the price will break through the line of resistance. However, in my experience so far, this is not always the case. Sometimes the resistance level is so strong, that just is not there enough power with the buyers to push through price line. I want to be ready to move in both directions. In this case, I would make an order above the resistance line and below the line higher bottom.

chart patternsOrder to Sell (sales) is placed below the “neckline” Target price projections in the future is calculated by measuring the distance between the highest points of the head “and the neckline which represents such profit to open a Sell position. The name speaks for itself. This is basically the formation of the head and shoulder. Lower valley is head. In this formation, made to order entry over the edge of the door. The objective is calculated as well as the pattern head and shoulders. We measure the distance between the head and the edge of the door, and that’s about the distance to which the price will move after it breaks. Formation Head and Shoulders is used as a popular name in technical analysis, is a frequent forms that trader used to identify trades trend of price movements. Forex traders resorted to this method because it is one of the very disclaim, especially in conjunction with other indicators of technical analysis from a rich palette of oscillators and trend indicators. It should be noted, that the very formation of a kind of trend indicator because of its special characteristics that fairly reliably provides the ability projection length of the newly formed trend, after the trades that initiates. Graphic speaking, this pattern consists of three peaks which are arranged on the trend line price movements in formation shoulder head shoulder where the head among them the highest peak (as shown on the chart). Pattern recognition is quite simply evident when analyzing the chart if the observer holds rules that the “head” is still second among the top three observed and that at the same time the highest point in the pattern. A special advantage in this formation is the ability to trade the trend projection length price movements in a new declining trend and it is calculated on the basis of measuring the distance from the “heads” to support lines “neckline”. In too many cases, this length is equal to the length of the path price in a declining trend (measured point of breakthrough, and expressed in pips) and longer than that. Based on these projections trader almost certainly can set their own TP (take profit) positions without worrying whether the price will reach that level, and in many cases go further than that in the same direction. What should be emphasized is the observation that in practice can happen appearance of yet another lower his shoulder after the formed pattern “head and shoulders” (as in the case of the graph) indicating caution that moment to open a Sell position should be sought only after the price dropping below neckline after closing the candle that has made a breakthrough. In addition, years of experience analysts, also points to the observation that the signal for Sell more reliable if the slope neckline pointing downward. Head and Shoulders Bottom/reverse head and shoulders Familiar reversal pattern marked by three (or more) prominent troughs: medium (head) is lower than the other troughs (shoulders). When the trend line connecting the peaks at the bottom of the broken, the pattern is completed. Head and Shoulders  of the head and shoulders – known reversal pattern marked by three (or more) prominent peaks with the middle peak (head) that is higher than the other peaks (shoulders). When the trend line, which connects the river bed at the bottom of the zigzag pattern is completed.

Chart Patterns Conclusion

Technical analysis can be used charts pattern for trading. They are double peak, double bottom, triangle and head and shoulders. It is needed to identify support and resistance point and set up trading order. It is included take profit and stop loss order. Very useful trading technique for all types of traders.

Chartist is an individual who studies graphs and historical data in order to find trends and predict trend reversals which include the respect of certain patterns and characteristics of the charts to determine the: support and resistance levels, the formation of head and shoulders, double bottom or double top for that are thought to indicate trend reversals.

 

Filed Under: Strategies Tagged With: chart patterns, patterns

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