Patterns to Watch to TradeWritten by Brian Tran
Last updated: Friday, 15 December 2006Most of the time, markets move in erratic and random directions, but there are times when markets move in a uniformed geometric shapes. These shapes identify areas of consolidation. These areas are the best areas to make the entries to profitable outcomes.
In forex, there are a few patterns that repeat more often than in any other instruments such as futures, stocks or commodities. These patterns are consolidation and continuation patterns signal the best high-probability setups. Since these are only a few to learn from, it doesn’t require much effort in understanding and observing them to trade them profitably.
• Triangles – These are the most common of all patterns. These draw during consolidation period. They usually are continuation patterns but each must be confirmed as such before making an entry.
• Pennants and Flags – Bearish or Bullish, they both give signals to impending moves.
From these charts below, these patterns repeat over and over and in many different time frames. It’s best to wait for these to develop fully and not make hasty decisions and identify them as such. There is one caveat, many times these shapes produce false moves or premature entries. Why? Because traders anticipate them before letting them fully developed and finish drawing the triangle before the trade is taken.
It takes time to produce these shapes. Although it’s like a guessing game, it pays to wait for it to fully develop.
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