One of the many ways of trading that many overlook is price patterns, these are formed all the time on the charts and help traders decide direction and probable movements. To an experienced trader they maybe able to see them all the time, however to the learner or average trader they may almost be invisible.
First of all, what is a pattern, it is a formation that is in everything, life, how a tree grows, Earths cycles, seasons, planetary movements, numbers and nearly just about anything. Same goes with psychology of the human mind and greed. And thus same goes with what is shown on Forex charts. That is what needs to be excepted as well, these patterns are literally everywhere. And even when we think there is no pattern there is a pattern forming in that type of thought form as well. Without these patterns we would seriously be in big trouble as well as it governs life cycles and other aspects that keep forming over time. So too, there is a spiritual aspect to these patterns as well, but that is not really what this post is about.
So too when these patterns are noticed on the charts and they can be traded with extreme high probability.
Here is an interesting tip I learnt a long time ago when first learning to trade is that the more beautiful a pattern formation is on the Charts the more likely this pattern will be respected.. This is so true in many ways. If the pattern looks clear and easy to see to the top traders then most likely the pattern will be traded as well by many others.
Understanding Patterns Equals Money
One of the attributes of these patterns is it allows us to determine changes in trend with less risk. By doing so it also allows us to set possible areas on the charts where price may retrace in these moves and then allow the trader using confluence to enter in an even better position than most other traders, thus allowing more pips and better profit.
Now these sorts of patterns are changing all the time, however this is the good part, once one forms just set alarms at the next pattern target and then decide from there whether to enter or not. These can also be used as blind order levels as well if you are very confident. The most important rule to follow though overall is not to ignore support and resistance at the same time.
Above – AUDUSD formed bullish price pattern
Above – EURUSD Formed bullish price pattern
Above – EURUSD Bearish Price Pattern Formations
In the above examples these pattern formations will appear regularly on the Charts.. Look for them and you will see.
So, ultimately what one is looking for in these pattern formations is when they are starting to form where most likely price will go if it retraces on the same pattern. Pattern formation can be picked up on after only a few pattern moves as well. While not all patterns will continue, when the pattern emerges and you get in on it it allows the trader to basically get in at almost the perfect price within this pattern. That entails to one thing, lots and lots of profit. Trade the trades that form the patterns well and go to these areas and use other aspects such as price action, major support and resistance to be you guide on entry. This gives a double confirmation which is always good as well.
In the Video Above I will go over how to identify them within the charts because they can sometimes very hard to see with the untrained eye. If you enjoyed this post then i recommend bookmarking this page to go over again later and also commenting your thoughts or questions below.