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The 28 Forex Patterns Complete Guide • Asia Forex Mentor
Forex Patterns
Charts record every price movement of the trading instrument. Charts reflect the traders’ sentiment in any given market scenario and depict the underlying mindset of the buyers and sellers. Traders tend to behave mostly in a similar pattern in identical situations. Since charts are a result of the actions of traders, the trading charts reflect patterns. Forex patterns and stock market patterns are similar to each other as the trader’s sentiment mostly drives these markets.
A deep understanding of these patterns provides the trader with the best entry and exit points and enables the trader to benefit from the entire trend movement. Successful traders master these forex patterns since they repeatedly occur and present multiple opportunities. The chart patterns appear in all time frames and are suitable for all kinds of traders. Both new traders and advanced traders can trade the patterns with great success.
The 28 Forex Patterns Complete Guide • Asia Forex Mentor
Contents
- Chart patterns
- Forex chart patterns
- Forex continuation chart patterns
- Reversal chart patterns
- Bullish forex patterns
- Bearish forex patterns
- Forex patterns
- Head and Shoulders
- Inverted Head and Shoulders
- Double Top pattern
- Double Bottom Pattern
- Triple top pattern
- Rounded Top pattern
- Rounded Bottom Pattern
- Ascending Triangle Pattern
- Descending Triangle Pattern
- Falling Wedge Pattern
- Rising Wedge Pattern
- Rising Pennant Pattern
- Falling Pennant Pattern
- Most profitable forex patterns
- Forex patterns cheat sheet
- Forex candlestick patterns
- Limitations:
- Conclusion:
The 28 Forex Patterns Complete Guide • Asia Forex Mentor
1. Pennants
2. Rising wedges
3. Falling wedges
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Reversal chart patterns
The patterns mentioned below provide the trader with an indication of the end of current trend and signal the beginning of trend reversal in the opposite direction.
1. Head and Shoulders
2. Inverted head and shoulders
3. Double top
4. Double bottom
5. Triple top
6. Triple bottom
7. Ascending triangle
8. Descending triangle
9. Rounded top
10. Rounded bottom
The 28 Forex Patterns Complete Guide • Asia Forex Mentor
Based on the direction of the ability of the patterns to indicate the potential price direction, the following can be classified as bullish patterns
1. Ascending triangle
2. Rounded bottom
3. Penants
4. Rising wedges
5. Cup and handle
6. Double bottom
7. Triple bottom
8. Inverted head and shoulders
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Bearish forex patterns
The forex patterns mentioned below indicate the higher possibility for the bearish price actiononce the pattern is completed
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Bullish forex patterns
The most important of the chart patterns is a head and shoulder pattern; it is
a bearish reversal pattern. This pattern provides an entry point and a stop
loss; the take pro t is calculated as a multiplier of stop loss. Its distinctive left
shoulder identi es the pattern and a head followed by the right shoulder. The
neckline is another critical component of the head and shoulder pattern,
neckline is drawn connecting the base of the shoulders and the head. The
pattern is completed once the left shoulder, head, and right shoulder are
formed, followed by the neckline break.
The 28 Forex Patterns Complete Guide • Asia Forex Mentor
The neckline break by the price is considered the best entry point, the stop loss can be placed on the high of the right shoulder, while the take profit can be calculated at a 1:2 risk-reward ratio.
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The 28 Forex Patterns Complete Guide • Asia Forex Mentor
Picture B, Inverted Head and Shoulders
Inverted head and shoulders is a bullish reversal pattern; the pattern has similar components like head and shoulders and is the opposite. Most new forex traders and experienced traders can successfully trade the head and shoulders pattern and are often considered profitable traders.
Inverted Head and Shoulders
The 28 Forex Patterns Complete Guide • Asia Forex Mentor
Double Bottom Pattern
Picture D: Double Bottom Pattern
A is a bullish reversal pattern; it is the opposite of the double top pattern and is often traded by new and advanced forex traders. The confirmation of the pattern is the break of the neckline after the formation of the double Bottom A and B. Stops can be placed at the swing low of Bottom B and profits can be booked at double the risk.
double Bottom pattern
The double top and double Bottom patterns are generally referred to as “M” and “W” patterns.
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The 28 Forex Patterns Complete Guide • Asia Forex Mentor
Picture E: Triple Top Pattern
Triple tops and are an extension of the double top pattern and is a bearish reversal pattern. The formation of three consecutive tops and the price break below the neckline confirms the pattern completion.
The entry point is upon the neckline’s break, and the risk is calculated towards the swing high C, and profits can be booked at a 1:2 risk and reward ratio.
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The 28 Forex Patterns Complete Guide • Asia Forex Mentor
Picture G : Rounded Top Pattern
The rounded top pattern is a bearish reversal pattern. While in an uptrend, the price fails to keep moving higher and stalls around the highest highs, then retraces by making consecutive lower highs signaling the uptrend’s weakness. Price also makes consecutive lower lows, and prices start to move lower, visually creating a rounded top showing the price reversal. The pattern completes once the price breaks the neckline.
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Rounded Top pattern
The 28 Forex Patterns Complete Guide • Asia Forex Mentor
Picture H : Rounded bottom pattern
The rounded Bottom pattern is a bullish reversal pattern and is opposite of the rounded top pattern. It is traded once the neckline is broken and the stop are placed at the lowest low of the curve, while take profits can be placed at a reasonable risk and reward ratio.
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Rounded Bottom Pattern
The 28 Forex Patterns Complete Guide • Asia Forex Mentor
Picture J: Descending Triangle pattern
Descending Triangle pattern is a bearish continuation pattern. Traders expect the prices to continue the trend after a brief pause in the movement. These patterns provide the best prices to book partial profits and to add more positions in an existing trade.
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Descending Triangle Pattern
The 28 Forex Patterns Complete Guide • Asia Forex Mentor
Picture K: Falling Wedge Pattern
A falling wedge pattern is a bullish reversal pattern. The pattern consists of 2 falling trend lines, with prices moving within the trend lines. The trend lines converge each other but do not join to form a triangle at the current market price scenario.
A break above the upper falling trend line A completes the pattern, and the trend is validated by a close of the candle above the falling trend line A. Stops can be placed below the previous low with profit targets with a 1: risk and reward ratio.
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Falling Wedge Pattern
The 28 Forex Patterns Complete Guide • Asia Forex Mentor
Picture M : Rising Pennant Pattern
Pennants are continuation patterns; depending on the formation within a trend, they can be classified as bullish or bearish.
The above picture M shows a rising pennant pattern. The pattern is formed when prices while in a uptrend tend to stay within the trend lines and show consolidation due to traders’ partial profit booking. The consolidation phase is marked by the price staying within the trend lines, forming a triangle.
The pattern is validated once prices break above the pattern with a candle close above the trend line. Prices tend to continue in the direction of the previous trend after completion of the pattern.
Rising Pennant Pattern
The 28 Forex Patterns Complete Guide • Asia Forex Mentor
Falling Pennant Pattern
Picture N : Falling Pennant pattern
A falling pennant is a bearish continuation pattern formed during a downtrend. The prices should be in a downtrend, and the pattern has to be formed within the downtrend. The consolidation phase, once broken, will lead to the continuation of the current trend.
Pennants are mostly formed during a trend and could be traded by new and experienced traders. The pattern tends to form frequently and provide good additional entry points. Many traders add multiple positions to ride the trend more profitably.
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