What is a chart pattern?
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  • #1 Collapse

    What is a chart pattern?
    Do you know what a chart pattern is and why is it useful for traders?

    Thank you.
    You only need to read THIS ARTICLE to make money from forex trading,
  • <a href="https://www.instaforex.org/ru/?x=ruforum">InstaForex</a>
  • #2 Collapse

    A chart pattern is a pattern within a chart when prices are graphed. In stock and commodity markets trading, chart pattern studies play a large role during technical analysis. When data is plotted there is usually a pattern which naturally occurs and repeats over a period. Chart patterns are used as either reversal or continuation signals.

    There are 3 main types of chart pattern which are currently used by technical analysts :

    1)Traditional chart pattern.
    2)Harmonic pattern .
    3)Candlestick pattern.
    candle stick pttern us used always . These chart pattern are very helpful for traders in forex marketing.

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    • #3 Collapse

      Chart patterns

      What are chart patterns ?
      Chart patterns are shapes typically formed during price movement on the chart, and these patterns can help us in predicting what prices might do next, based on the chart pattern which is formed on the chart from past price movements. So, it is very important to know well all these chart patterns in order to be able to predict price trend after forming one of these chart patterns. And there are around 12 types of chart patterns, which are :
      • An ascending triangle chart pattern : is a type of chart patterns that typically appear during an uptrend typically at its middle, when the price moves between an upper resistance line and a lower upward line, until range of moving the price becomes very tight. And at the end, the price typically closes above the upper resistance line to continue its moving up with the previous uptrend.


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      • A descending triangle chart pattern [/COLOR][/B]: is a type of chart patterns that typically appear during a downtrend typically at its middle, when the price moves between a lower support line and an upper downward line, until range of moving the price becomes very tight. And at the end, the price typically closes below the lower support line to continue it moving down with the previous downtrend.


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      • A bearish symmetrical triangle chart pattern : is a type of chart patterns that appear during a downtrend, when the price moves between an upper downward line and a lower upward line, until range of moving the price becomes very tight. And at the end, the price closes below the lower upward line to continue its downward movement with the previous downtrend.


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      • A bullish symmetrical triangle chart pattern : is like the bearish symmetrical triangle chart pattern, but it is formed during existence of an uptrend. And it ends with closing the price above the upper downward line to continue its upward movement with the previous uptrend.


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      • An Ascending wedge chart pattern : is a chart pattern formed when the price is forming a series of higher highs and higher lows between two uptrend lines. and the price moves between those two levels until range of moving the price become very tight, until the price closes outside one of the two lines. Then the price typically moves up in case of closing it above the upper uptrend line, or moves down in case of closing the price below the uptrend line.


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      • A descending wedge chart pattern : is a chart pattern formed when the price is forming a series of lower highs and lower lows between two downtrend lines, and when the price closes outside these two lines, it typically moves in favor of the breakout direction.


      • Head and shoulders chart pattern : is a chart pattern formed of three peaks, the first and the third peak are typically shorter than the second peak, and they are typically formed above a strong support line is called the neckline. When this chart pattern formed on the chart, it typically indicates that the price will breakout the below support line (neckline), to move in a downward movement.


      • Inverted head and shoulder chart pattern : is a chart pattern formed of three bottoms, the first and the third bottom are typically shorter than the second bottom, and they typically formed below a strong resistance line is called the neckline. When this chart pattern formed, it indicates that the price will breakout the above resistance line (neck line), to move in an upward movement.


      • A double bottoms chart pattern : is a chart pattern formed of two bottoms below a strong resistance line is called the neck line, and it indicates that a breakout is likely to occur to the upper resistance line, and that the price will move in an upward movement after it closes above the upper resistance line.


      • A double tops chart pattern : is a chart pattern formed of two tops above a strong support line is called the neck line, and it indicates that a breakout is likely to occur to the lower support line, and that the price will move in a downward movement after it closes below the lower support line.


      • A bullish rectangle chart pattern : is a chart pattern formed at end of a downtrend, when the price moves in a sideways trend among two specific levels, to indicate that a reversal is likely occur from a downtrend to an up trend.


      • A bearish rectangle chart pattern : is a chart pattern formed at end of an uptrend to indicate that a reversal is likely to occur from an uptrend to a downtrend.


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      • #4 Collapse

        Forex trading market technical analysis is very important when we start doing technical analysis, then we have different charts from which we can analyze the market. A chart is an outside chart, a line chart and a candle stick chart, so these charts are very important. So the chart which is created in it, we are very important because with the help of it we say a lot from here. But we should do good work, if we do a good job in it, you can still be successful in it, then we would like that time, we should never stop working in it and stop doing good work so that in this We should continue to make good use of this chart, in which the more we gain from it, we become equally successful in it because we have our own advantage in it. We should not just dare so much that we keep working well in it, we have our own advantage in it and we can be successful in it, just we should never do something similar in our work. For this, we need to work hard in it. We should also work hard in it and never lose courage, if we do a good job in it, then we can never be successful in it. We need some time to be good at it Lose courage in the voice of they only fail in this, then we only have to succeed in this, so for this we have to work even harder. You do good work, work well so that you can succeed in it and the more you work in it, the more beneficial will be for you.

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        • #5 Collapse

          Charts are a structured form of representation of data that help in decision making. We take help of price movement and fluctuations to arrive at a decision. Though no one can predict the direction of markets, the only way charts help in is better presentation of data. A chart pattern is a graphical presentation of price movement by using a series of trend lines or curves. Chart patterns are the foundation of technical analysis. In technical analysis, chart patterns are used to find trends in the movement of an asset’s price. Patterns can be based on seconds, minutes, hours, days, months, or even ticks and can be applied to a line, bar, candlestick charts. There are many different chart patterns that are used in technical analysis. Chart patterns are important as part of your technical analysis. From beginners to professionals, everyone uses them to predict the movements varying from various markets to currencies. Chart patterns are shapes which help predetermine price breakouts and reversals. Recognizing patterns helps you gain advantage and mastering them makes you more confident to invest money . The most basic form of chart pattern is a trend line. Popular chart patterns include head and shoulder formations, double and triple tops and bottoms, pennants, flags, and wedges.
          Types of chart pattern:
          There are two basic types of patterns: continuation and reversal.
          Continuation Chart Patterns:
          Continuation patterns identify opportunities for traders to continue with the trend. The most common continuation patterns include Triangle patterns, Flag patterns, and Pennant patterns.
          Reversal Chart Patterns:
          The reversal pattern identify opportunities for traders to reverse the trend.. These are used to look for scenarios to trade the reversal of a trend.

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          • #6 Collapse

            Chart patterns are the foundation of technical analysis. In technical analysis, chart patterns are used to find trends in the movement of an asset’s price. Patterns can be based on seconds, minutes, hours, days, months, or even ticks and can be applied to a line, bar, candlestick charts. There are many different chart patterns that are used in technical analysis. Chart patterns are important as part of your technical analysis.Forex trading market technical analysis is very important when we start doing technical analysis, then we have different charts from which we can analyze the market. A chart is an outside chart, a line chart and a candle stick chart, so these charts are very important. So the chart which is created in it, we are very important because with the help of it we say a lot from here. But we should do good work, if we do a good job in it, you can still be successful in it, then we would like that time, we should never stop working in it and stop doing good work so that in this We should continue to make good use of this chart, in which the more we gain from it, we become equally successful in it because we have our own advantage in it. We should not just dare so much that we keep working well in it, we have our own advantage in it and we can be successful in it, just we should never do something similar in our work. For this, we need to work hard in it. We should also work hard in it and never lose courage, if we do a good job in it, then we can never be successful in it. We need some time to be good at it Lose courage in the voice of they only fail in this, then we only have to succeed in this, so for this we have to work even harder. You do good work, work well so that you can succeed in it and the more you work in it, the more beneficial will be for you. Chart patterns are the foundation of technical analysis. In technical analysis, chart patterns are used to find trends in the movement of an asset’s price. Patterns can be based on seconds, minutes, hours, days, months, or even ticks and can be applied to a line, bar, candlestick charts. There are many different chart patterns that are used in technical analysis. Chart patterns are important as part of your technical analysis.
            Digital Millionaire

            :fxrocks: A Name Of Profits

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            • #7 Collapse

              Hello dear Forex members, How are you all?
              Forex chart patterns are on-chart price action patterns that have a higher than average probability of follow-through in a particular direction. These trading patterns offer significant clues to price action traders that use technical chart analysis in their Forex trading decision process.

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              • #8 Collapse

                WHAT IS A CHART PATTERN?

                The origin of chart pattern.


                What we know today as chart patterns is a set of market structures that constantly appear on our chart and because of that these patterns are also often referred to as market structure. We don’t know exactly when the chart pattern first used the only information we have is from books by technical analysts and according to them, the patterns are actually a branch of support and resistance. In his 1932 book, Richard Schabacker laid out the basis for modern pattern analysis. In the book Technical Analysis of Stock Trends that was first published in 1948, Edwards and Magee credited Richard because most of the concepts that they put in their book actually came from Richard.

                Until today, the patterns are still widely used and especially by a group of traders calling themselves naked traders. What they do is they constantly watch for patterns and exploit them to make money. Identifying a pattern in the market is not a hard thing to do because it is something that is very obvious. One of the rules of identifying a pattern is if it’s not obvious then you skip it. Of course, when trading in the real market you will see variation and the patterns are simply that textbook-perfect so there is some level of subjectivity in this matter.

                Chart pattern development in today’s world

                Originally there were only several patterns that traders observed but with the development of technology we can see a lot more chart patterns and people are putting them up online so you can find them easily and free too. That said, not all of those patterns are applicable in the forex market, which is the focus of this article. The reason is the forex market is a very efficient market that really runs 24 hours a day, 5 and a half days a week with unmatched gigantic volume. These patterns will come up in any time frame, any trading instrument no matter what and so you only need to deal with how to enter the market and all of the other details to produce a profitable trade. What are those patterns? Let’s introduce them one by one…..


                PATTERNS THAT OFTEN APPEAR IN FOREX

                Zigzag or ABC Pattern. This pattern is the simplest one among everything else because it only has 3 lines to form but it is the basic foundation for a good trending market. It can also be a mini version that is part of another pattern. It is very easy to identify this pattern and you can’t mistake it for something else. Here’s what you should look for:
                • The pattern consists of 3 lines.
                • The middle line is usually the shortest line among the 3.
                • The first line can be longer than the 3rd line or the 3rd line can also be longer than the 1st line.
                • The pattern itself is a continuation pattern but at the end of the pattern it’s actually a reversal pattern.


                Pattern psychology. This chart pattern has a very significant role in the market because this is the sole momentum pattern that can act alone or as part of another pattern. The short middle line is the pause that usually happens before the trend resumes its way. It is also part of Elliot Wave and that’s why this pattern has a large following by traders around the world. If the first line is longer than the third line then it shows that the momentum is slowing down and the reversal that will come up after the pattern is finished might be strong. If the first line is shorter than the third line then it shows that the momentum is still going strong and it’s possible there will be another pause like the 2 line and the pattern will evolve into another pattern. You can see the chart below for real-time appearance of this pattern:

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                You should remember that chart pattern/structure is a big formation on your chart and it’s not in any way an entry signal. For entering the market you need other things like the candlestick pattern to pinpoint your trade entry. Candlestick patterns are used in conjunction with chart patterns to produce a solid trading strategy. Also, you should remember to have a little bit of discretion because the real market sometimes doesn't produce a formation like you see in textbooks and that is why you should master the characteristics of the chart pattern rather than saving the ideal picture in your head. Other variations can be found from another type of chart analysis, the Elliott Wave. In books on this EW topic you will find that they call zigzag type formation as “correction” pattern. There are several variations of correction patterns there that will be useful for you in your pursuit of pattern analysis.


                Triangle pattern. Triangle is one the most common patterns that you will find in the forex market. The reason for this is this pattern has a lot of variation so it can be confusing sometimes. Triangle pattern, just as the other chart patterns, both have a bullish version and bearish version so for whatever version you see in the examples you just need to flip it upside down and you have yourself the bullish version/bearish version. Here’s what you should look for:
                • The pattern is a multi wave pattern which means it requires more than 3 waves (as compared to the zigzag/ ABC pattern).
                • The pattern is drawn with 2 lines (1 above and another below) that eventually converge near the end of the pattern (which is usually a breakout).
                • The characteristic of this pattern is the price will shrink signifying market indecision on a bigger level (as compared to candlestick indecision candles).


                Pattern psychology. Although chart patterns have a tendency to move to one side of the market the outcome might not be the same in every appearance depending on the market condition at that time and the surrounding environment. This triangle can also be part of another pattern (as is the case for every chart pattern). This pattern has big implications on the market participants because it signals indecision. The longer the pattern form the stronger the breakout will be (generally speaking). The more the price moves toward the end of this pattern the more anxious the traders are because they expect a breakout. Traders usually put their order near or at the swing point of this pattern and put the stop loss just wide enough to accommodate the potential market whip which usually happens with a contraction-type pattern.

                As I mentioned before, this pattern has a lot of variation and to name them one by one:
                • Symmetrical triangle pattern
                • Asymmetrical triangle pattern (Megaphone pattern)
                • Descending triangle pattern
                • Ascending triangle pattern
                • Rising Wedge
                • Falling Wedge
                • Bullish Pennant
                • Bearish Pennant


                and all of them have the same characteristic with added details like the length of the pattern, the size of the whole formation and then the angle of the descent or ascension. Ascending triangle is characterized by price bouncing off from a resistance area while higher lows formed the diagonal support line. Descending triangle is the direct opposite where price bounced off from the support area where at the same time the lower highs make a diagonal resistance line. Megaphone is another variation that is unique because it is showing more and more volatility instead of constricting the price like any other triangle pattern thus, there are no converging triangle lines near the breakout of the pattern like in the other triangle patterns. The internet is full of pictures on those variation patterns but the main take from those patterns is how you should handle the trade when they appear.

                It’s worth reminding that the market will show you variation and non-ideal patterns so sometimes it’s gonna be hard to discern whether the pattern is this or that one. Check the previous chart above for the appearance of a triangle pattern. You can trade this pattern by using breakout strategy because that’s how it should be traded and you can find the information on that in here:

                Trading the Breakout


                Double top/ double bottom (M or W) pattern. This pattern can stem from a failed zigzag pattern where the price simply can’t go beyond the middle line of the zigzag pattern and instead the 4th line goes into the direction of the 1st line. Here’s how it should ideally form:
                • The pattern is formed with 4 lines.
                • The 1st and 4th lines are longer than the 2nd and 3rd lines.
                • The 2nd and 3rd lines are equally short.
                • The look is clear whether it’s the M or W pattern.


                Pattern psychology. The anticipation of this pattern is after the 4th line is finished (and therefore, the pattern is also completed) there would be a reversal. The 3rd line is the critical line for the formation of this pattern because if it broke the extreme level from line 1 and 2 the zigzag pattern will be formed and we won’t see the M or W pattern. The 4th line then, is the nail in the coffin, and if the 4th line can break the extreme of line 2 and 3 then the M or W will be formed.

                This pattern is also confusing because there are actually more variations to this pattern depending on how the pattern is formed. For further study on this variation you can check out Harmonics pattern. The Harmonics pattern deals with the variation of the M and W pattern in a very detailed manner. The patterns will need certain ratios but like I said before, you don’t need to worry because the main point of the pattern is the 3rd and 4th line where the 3rd line should not break and the 4th line should break. Check out the chart below!

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                Head and shoulders pattern. This pattern is quite famous too because of the significance in determining the market direction and momentum. The formation is like a head of a person with the left and right shoulders and this is where the name came from. The characteristics of this pattern is:
                • The pattern is formed by 6 lines.
                • Line 1 and 6 are longer than the other lines.
                • Line 3 and 4 are longer than line 2 and line 5.
                • The support area at the bottom for the shoulder should not tip too far up or down when the swing points are connected.


                Pattern psychology. The pattern is a big pattern and you won’t (you should not) miss it when it appears. Even when the market does not give you a perfect form you will still be able to see this pattern clearly due to the extreme movement from line 3 and line 4. This is also part of the Elliott Wave and usually can appear as part of the correction or after the impulsive wave is finished (line 3 as the 5th wave in Elliott Wave). Variations on this pattern usually happen during the 2rd line up until the 5th line. There is also another variation of this pattern that often gets confused with another pattern and it’s called Triple Top/ Triple Bottom. In this pattern, the 3rd line can’t go far beyond the start of the 2nd line (end of 1st line). This in turn, makes the swing points from the resistance area almost equal and thus, the name Triple Top. See chart above for the visual of this pattern.


                Rectangle pattern. This is an important pattern because it is the apex of market-pause pattern. This pattern is usually formed by sideways price and it’s very obvious when they appear. Here’s how it usually appear:
                • This pattern is formed by multiple waves up and down in a contained range.
                • The pattern is confined between a resistance area on the top and a support area at the bottom.
                • The price should not punch too high or too low from the support/ resistance areas.
                • A valid rectangle pattern should be longer than Triple Top pattern (Rectangle pattern can also be viewed as an extension of the Triple Top/ Triple Bottom pattern).


                Pattern psychology. The psychology behind this pattern is that the price is contained due to the uncertainty behind the underlying situation. This is not just a market pause because it’s much longer than a market contraction. The result of this pattern (as in other chart patterns) is a breakout. Generally speaking, the smaller the pattern is in size, the bigger and stronger the breakout will be. You should be careful when trading this pattern because there are a lot of pending orders at or near the S/R that caged the pattern and there’s a lot of volatility around those S/R areas too. Please refer to the Breakout Trading article that I mentioned before to be able to properly take advantage of the breakout from this pattern.

                There are also variations of this pattern that you might find in the market such as:
                • Ascending Channel pattern
                • Descending Channel pattern
                • Bullish Flag pattern
                • Bearish Flag pattern


                The difference between the default Rectangle pattern with its variations is the Channel and Flag patterns are both sloping up/ down and also, although the Channel and Flag are both a sloping-pattern they both differ in terms of length and size. Channel patterns are much longer and bigger than the Flag patterns. Refer to the chart below for the pattern’s visual:

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                Diamond pattern. This pattern is a unique pattern because it signifies confusion and failures of the market direction because of its formation. It could also portray the high volatility condition of the current market. Here’s how it should appear:
                • The pattern first appear as a Megaphone pattern and then it failed to breakout
                • The failed Megaphone pattern continues straightaway to form a Symmetrical Triangle pattern.
                • Please refer to the conditions of the Triangle patterns for details on how the Triangle pattern (and its variation) form.


                Pattern psychology. Although, the pattern is different in appearance the way we should treat this pattern is actually quite similar with the Triangle pattern because that is the end result of this Megaphone pattern, a breakout. Also, please refer to the Breakout Trading strategy for ways to deal with this type of trading. Check out the previous chart for how the pattern might look.


                Cup and handle pattern. This pattern is different from the other patterns discussed so far. The underlying market conditions that are required to show this pattern is not that often found in the forex market. Here’s what needed to have this pattern:
                • This pattern is formed with only 2 lines.
                • Instead of having a straight line it starts out with a bowl-shaped bottom.
                • As you would have it, a handle is needed to hold a cup so the end of this pattern is actually a Flag pattern.


                Pattern psychology. This pattern is a broken form of a Zigzag pattern because there is really a lack of decisiveness that you have in ABC pattern. This pattern is to be defined as a continuation pattern instead of a reversal pattern. However, the market is the true master to decide this kind of thing so it’s best to watch out for more evidence and because this is a breakout-type trade you should, once again, refer to my other article in this forum about Breakout Trading. As is the case with every other pattern I mentioned in this article, this pattern has a bearish version also. See the chart below.

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                You only need to read THIS ARTICLE to make money from forex trading,

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