Common figures of technical analysis Forex.
There is an incredibly large number of these formations, which occur in all markets and time periods. Disassemble all pieces will be pointless, that is why in this article we speak only about the most popular trading set-UPS that are used by traders at various levels of training and the pattern of trade. The basic concept of technical analysis:
“All ingenious – is simple!”
Accordingly, it is not necessary to find a complex trading setup, because even the primitive shapes have a high positive potential, if properly interpreted in the market space. Conventionally, all the classic figures of technical analysis are divided into the following types:
• Pennants and flags.
• Double bottom and double top.
• Triple bottom and double top.
Is a fairly common formation in the market, which is fairly easy to recognize visually. In its texture it is largely similar to the triangle, but has a more elongated, angular shape. A similar pattern can be found in almost any time period, but it is worth considering one fact, the figure formed on a higher timeframe, has the highest chance for a positive testing. Are the formation gives a clear understanding of what the current price movement has greatly lost its power, the price is not able to update to new market highs. New high located on the same level as the previous one. Understanding this time, you can most likely guess what happened from the intensification of market participants and soon could be an impulse move. Such formation has the following divisions:
• The wedge upward.
• The wedge downward.
Rising wedge with the greatest accuracy indicates the investor to a significant pressure from the sellers, the price in such cases, it visually shrinks. In the near future we can expect a powerful wave of proposals and the price will go in a downward vector.
Falling wedge is a direct signal of the presence of significant activity of buyers in the market. Logical to assume that in the near future it is expected a significant increase in demand. Accordingly, the price will be nothing left as to move in an upward direction for updating new highs.
All triangles are the most popular patterns of technical analysis that have a high percentage of positive castings. There are similar formations very often, paradoxically, even on small timeframes described setup fulfills very well. All the triangles are subdivided into the following types:
• Symmetrical triangle.
• Ascending triangle.
• Descending triangle
The symmetrical triangle is formed by merging two lines of the symmetrical type, which tend to intersect. This setup is found on the market with surprising regularity. For the most part, such formation signals continuation of the current trend. However, you need to consider which side of the figure has broken the price. If you notice that the price breaks the opposite direction of the current price movement, it is possible to think about the future change of the global trend.
Ascending triangle begins to form after the appearance of the strong resistance, which depends on the price. New highs do not appear, but each new minimum appears above the previous one. Through them we can draw a trend line, which will have an upward vector. The described formation is evident during the end of the uptrend.
Descending triangle originated after identifying a clear support level which price could not move on. Characteristic of a downtrend, it signals a possible shift. Thus, the price does not forms new lows and through the highs, we can draw a trend line, which will have a downward trend.
Flags and Pennants.
There are given figures of technical analysis Forex after a prolonged trend. Usually, they indicate the trader on the appearance of some pauses in the movement, after which you can expect a strong impulse breakthrough, which often shoots in the direction of the current trend. The formation of such formations occur quickly and dynamically, while they practiced with a high percentage of probability.
Flag its appearance on the market would mark a consolidation after a strong price run. Simply put, the presented setup is a correction from the current direction of price movement. If it is pointing down, it is the first sign of the continuation of a strong uptrend.
Pennant has a similar type of formation with the previous figure, but their appearance is more akin to a symmetrical triangle. The trading concept of these shapes are similar, as are the ways of their formation.
The presented figure, his appearance on the market largely point to a continuation of the current trend. High percentage of profitability is the main property of these patterns is, of course, if they can correctly identify and correctly interpret the market conditions. Remember described setups should be directed in the opposite direction from current trends. If they have the same direction, it is better to delay market entry.
The appearance of this setup on the market is rather rare, however, fulfilled it perfectly! The figure outlines, form the levels of support and resistance, parallel to each other. Some investors believe that the described formation is foolish to consider as a separate pattern, citing its similarity with the triangles that are formed close to each other. This pattern is considered reversal, its appearance on the market clearly will indicate to the participants about the possible change of the global trend. This figure should be considered exclusively on large timeframes, and therefore, the formation will experience a long period of time. It argued that the maximum for an uptrend this figure shows much faster, because the nature of trade buyers and sellers technically has significant differences.
The head and Shoulders.
Is the most popular, in fact, a classic pattern in the market, pointing to a possible trend reversal. Accordingly, education is represented by the figure after a protracted movements will be the most clear sign of redistribution of power in the market. The figure consists of three peaks which should rest on the “neck line” (support). Setup is considered to be completely formed when the price breaks through that very support. Many traders admit a gross error when you start trading even before the final formation. Remember, while the pattern will not accept a final invoice, to speak about change of a global movement yet. Such oversight can be very costly to the investor! With regard to the described figures, it has top priority exclusively on large time intervals, or the probability of testing positive is very low. The most important thing:
“ Please wait for the final shaping – be patient!”
Only then can you consider the potential opportunity to enter into potential transactions in the market.
Double bottom and double top.
Quite popular patterns of technical analysis, largely pointing to a possible reversal of the current trend of the market. Data generation setups after a strong pulse movement enhance the probability of a true change in trend. A few words about the double top. A similar formation is seen after visually strong upward movement. The price is not able to reach a new high and freezes at the identical level at which was formed the previous high. The market rests on a strong resistance level, from which the possible rebound and subsequent reversal.
The figure covers the trader a clear weakness on the part of buyers, the market demand is in a phase of the apparent slowdown. A double bottom is formed on the identical principle, but typical of the declining trend characterizes its spread.
Figure perfectly fulfilled even on low time frames!
Triple bottom and triple top.
Are more sophisticated versions of previous figures. Are formed on the market for much longer and have a higher trading priority, instruct the investor to change the global trend.
Triple top formed a strong resistance that the price tried unsuccessfully to break three times. In turn, the triple bottom is formed, through a clear support level which price could not overcome three times in a row. Presented formation in its structure are divergent and are most likely to indicate a possible change of the current price movement.
So we dismantled the most popular formations of technical analysis of the market, which can bring significant profit in the right hands. On their basis can build their own trading system that will have excellent mathematical expectation and remain profitable under any market conditions!