POPULAR CHART PATTERNS
Graphical Analysis and reading of chart patterns allow trader to take trade according to movement pattern suggest. For experience trader its quit easy to understand the chart patterns but for new trader its looks complicated and complex to understand but still it’s not so hard to understand.
With this article we are trying to define and describe some popular chart patterns that are developed over the year and used daily for trading purpose.
Chart price patterns help traders recognize trends, movements and the patterns developed from the price fluctuations of currency pairs. Forex chart patterns can help you enter a trade at price which can help to earn good returns.
Here are some popular chart patterns.
Widely used and one of the oldest chart patterns is the Japanese Candlestick Chart patterns originated in Japan in the 1700s.Some variation of the candlestick patterns are
Single Candlestick-this pattern is separated into the hanging man and the hammer.
The hanging man shows the peak or zenith of a price gain, showing that there is an increase in the number of sellers against buyers and therefore creating a downward shift. On the contrary a hammer is the signal of an approaching bottom price and a speculation of the price if the pair to rise soon after.
More single candlestick pattern are the shooting star and the inverted hammer. The latter occurs on a downward trend, showing that majority of the sellers of the pair have exited trade and buyers will start moving in soon.
Triangle Patterns separated into the Ascending Triangle Pattern and Descending Triangle Pattern. These two slops come together at the point of a triangle. Equilibrium between buyer and seller indicated but the closer the slops move towards the apex of the triangle its indicating greater the possibility of a breakout. An ascending triangle pattern is developed when buyers push up the price to create a higher lows slope.
The inverse of the pattern is the descending triangle where the lows usually stay on the fairly straight line with the highs creating downward movement
HEAD AND SHOULDERS
Head and shoulders and its inverse with the predictable name inverse head and shoulders are two very popular and most used patterns. The heads and shoulders pattern forecast a downward movement of the price whereas the inverse pattern predicts an upward one.
Basically this pattern involves two minor price highs on the opposite sides of a higher price high and inverse head and shoulders involves two higher lows of a ‘lower’ low.
DOUBLE TOP DOUBLE BOTTOM PATTERN
This double top pattern is very similar to the head and shoulders patter with two peaks indicating that the buyer’s interest has waned with the chance of the downward movement.
On the opposite the double bottom pattern has two low price valleys which predict an upward trend as buyer interest is picked.
RISING FALLING WEDGE
The rising and Falling wedge looks like similar to the ascending or descending triangle pattern but there is a key difference; this pattern has two sloping movement that are nearly parallel contrasting the covering trend lines of the triangle.
In addition, the wedge does not usually include an uptrend break due to both trendlines sloping down. Another differentiation is that the shallower slopes indicate a longer term pattern, compared to the triangle.