There are literally hundreds of different Forex chart patterns available to traders. The first thing you need to know is that chart patterns fall into two basic categories: Reversal patterns typically occur after an extended move up or down. Just as the name implies, they signal a possible reversal in the market. Notice how the market made an extended move up but found a key resistance level, which ultimately led to a trend reversal. The chart above is called a double top. We will discuss forex pattern in greater detail later in this lesson. This break led to a continuation of the former uptrend. Forex are four of the most reliable and profitable chart patterns found in the Forex market. So while there is no such thing as a sure thing when it comes to trading, these patterns will certainly help you in your efforts to become consistently profitable. Not only that, but these chart patterns occur quite often once you begin looking for them. Below is an example of a bearish wedge pattern that formed on the GBPNZD 4 hour chart. One thing to note here is that although the bullish and bearish wedge pattern is technically a continuation pattern, it should only be traded based on the direction of the breakout. The head and shoulders pattern is one of the more recognizable reversal patterns in the Forex market. Notice how after making an extended move up, the market found resistance at the first shoulder. The market then made a new high but quickly returned to neckline support. As soon as the market closed below the neckline, the head and shoulders pattern was confirmed. This Forex chart pattern can be extremely profitable if traded correctly. The double top and double bottom Forex chart patterns represent another profitable way to trade reversals in the Forex market. Pattern like the head and shoulders pattern, these forex patterns form after an extended move in the market that leads to a trend reversal. The double top forms after an extended move up. In the Forex chart pattern above, the market made a new high first top after an extended move up. After finding support at the neckline, the market attempted to form a new high, but found resistance at the previous high. This formed the second top of the pattern. This Forex chart pattern is easily recognizable due to the two tops which coincide with the same resistance level. The double bottom is similar to the double top, only this time the pattern occurs after an extended move down. The double bottom forms the base of a trend reversal, where the market moves from a downtrend to an uptrend. In the NZDUSD chart above, the market made an extended move down where it found support at the first bottom. The market rallied but quickly found resistance at the neckline. The next rally broke neckline resistance and opened the door to a much larger reversal. See chart lesson on the double bottom pattern to learn more. Bull and bear flags, also called bullish and bearish flags are a continuation chart chart. This means that they typically break in the direction of the former trend. Notice how after making an illustrations move up, the market began to move sideways and consolidate. This formed a bullish flag that eventually broke to pattern upside as a continuation of the former trend. See the lesson on bullish pattern bearish flag patterns to learn more. Although there are hundreds of Forex chart patterns available to traders, the patterns discussed in this lesson are some illustrations the most reliable and profitable. Justin Bennett is a Forex trader, coach and founder of Daily Price Action. He began trading equities and ETFs in and later transitioned to Forex in His "aha" moment came in when he discovered the simple yet profitable technical patterns he teaches today. Justin has now taught more than 1, students from 53 countries in the Daily Price Action course and community. 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Please remember that the past performance of any trading system or methodology is not necessarily indicative of future results. Forex Chart Patterns You Need to Know There are literally hundreds of different Forex chart patterns available to traders. Continuation Chart The first thing you need to know is that chart patterns fall into two basic categories: Here is an illustration of a Forex reversal pattern. Below is an illustration of a Forex continuation pattern. Forex Chart Patterns You Need to Know Below are four of the forex reliable and profitable chart patterns found in the Forex market. Head and Shoulders Pattern Reversal The head and shoulders pattern is one of the more recognizable reversal patterns in the Forex market. Below is an example of a head and shoulders pattern that formed on the EURUSD daily chart. Double Top Chart Pattern The double top forms after an extended move up. Below is an example of a double top that formed on the EURUSD daily chart. Double Bottom Chart Pattern The double bottom is similar to the double top, only this time the pattern occurs after an extended move down. Here is a great example of a double bottom pattern on on the NZDUSD 4 hour chart. Bull and Bear Flags Continuation Bull and bear flags, also called bullish and bearish flags are a continuation chart pattern. Below is an example of a bullish flag pattern that formed on the AUDCHF daily chart. Summary Although there are hundreds of Forex chart patterns available to traders, the patterns discussed in this lesson are some of the most reliable and profitable. Private Trading Community Login Sign up illustrations a lifetime membership. Copyright by Daily Price Action, LLC.
The power of chart pattern recognition and many examples all in one chart of GBP/JPY.
The power of chart pattern recognition and many examples all in one chart of GBP/JPY.
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