Three Most Popular Chart Patterns in Forex Trading

Posted by Deb | Forex,Guest Post | Monday 26 August 2013 11:31 pm

There are many set-ups you can use when trading currencies. Many of them may appear like it’s sound and can bring you profits but be warned – there are many set-ups that can only result in a loss.

Forex traders can minimize some of the trial and error involved by using the chart patterns that have been proven by other forex traders as effective and have proven to be profitable set-ups.

Channel Pattern

The channel pattern is one of the most recognizable patterns in forex charts because it looks quite distinctive. It is two parallel trend lines that enclose price. These lines essentially govern the trend. Trades are usually entered that follow the trend – in this case, when the price bounces off one of the trend lines. Your profit target is usually within the domain of the opposite trend line. This set-up and strategy is quite profitable and if you have made the correct assumptions, you can ride the trend as it moves within the range and between the two trend lines. Even when the price penetrates the trend lines, there is still the opportunity to earn since the trader can then trade on the breakouts.

Double Top

A double top is another very recognizable set-up. The double top happens when the price of the currency tests the resistance level on two different occasions and is not able to break the resistance. When this happens the price now breaks and assumes a bearish movement. When a trader sees this pattern on his chart he will commence his trade when the price breaks the neckline and then the trend is joined when the price begins the pullback to the broken neckline. You will have a 73 percent chance of a successful trade using this pattern, which is quite high.

Asymmetric Triangle

The asymmetric triangle can be identified by looking the chart and looking for an asymmetric triangle where there is a trend line and one horizontal level that price will usually be able to penetrate. Trading with an asymmetric triangle pattern is similar to how you trade double tops – trade is entered after the currency price pulls back and goes to the broken horizontal level. But this trade is done with a strict stop loss and only of the risk/reward is 1:5:1. The asymmetric triangle has a success rate of 76%, which is very high.

These three patterns are quite effective in providing forex traders with a useful and tested way of plotting out a strategy and giving signals on when to enter into a trade. These three patterns pass the forex traders text of being profitable patterns regardless of the currency pair used.

About The Author

Mario Singh talks more about forex strategies at his website Askmariosingh.com

Share

1 Comment »

  1. Comment by Shelly from grocery printable coupons — November 9, 2013 @ 2:21 am

    Excellent article! We will be linking to this particularly great content
    on our website. Keep up the good writing.
    Shelly@grocery printable coupons recently posted..grocery printable coupons

RSS feed for comments on this post. TrackBack URI

Leave a comment

CommentLuv badge

This site uses KeywordLuv. Enter YourName@YourKeywords in the Name field to take advantage.