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Vol.5. More Profits in < PATTERNS >. PATTERNS. ven KEY pra WIN SURE sh. TECHNICAL Analysis. www.forex2tradeindia.weebly.com. Trading Friends Trend Advisors. Dynamic Subject. Logical Thinking towards Price Action. forex2tradeindia. Your Success Story Begins from HERE.

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Forex2tradeindia

Vol.5

More Profits in

< PATTERNS >

PATTERNS

venKEY

praWIN

SUREsh

TECHNICAL Analysis

www.forex2tradeindia.weebly.com

TradingFriends

Trend Advisors

Dynamic Subject

LogicalThinkingtowards Price Action

forex2tradeindia

Your Success Story Begins from HERE

http://forex2tradeindia.weebly.com/

Email : - forex2tradeindia@yahoo.com

venKEY


Classical chart patterns

High Profitable

Technical Analysis - PATTERNS

  • Head & Shoulder

  • Inverted Head & Shoulders

  • Double / Triple Tops

  • Double / Triple Bottoms

  • Triangles

    • Ascending Triangle

    • Descending Triangle

    • Symmetrical Triangle

    • Diamond

  • Channels

    • Ascending Channel

    • Descending Channel

    • Horizontal Channel

  • Flags – Bullish/Bearish

  • Wedges / Pennants

  • Cup & Handle

  • Rounding Top

  • Rounding Bottom

CLASSICAL CHART PATTERNS

PATTERNS

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Believe in Charts

Confirm with Candles

venKEY


Forex2tradeindia

CHART PATTERNS (Quick View-1)

RISK 1

Reward-2

PATTERNS

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venKEY

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venKEY


Forex2tradeindia

CHART PATTERNS (Quick View-2)

RISK 1

Reward-2

PATTERNS

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venKEY

venKEY

www.forex2tradeindia.weebly.com


Chart patterns

Chartists try to identify patterns to anticipate the future price direction. 

ChartPATTERNS

Trading PATTERNS

In technical analysis, the distinctive formation created by the movement of security prices on a chart.

Price-lines in course of its journey time creates PICTORIAL DIAGRAMS is known as “PATTERNS”

It is identified by a line connecting common price points (closing prices, highs, lows) over a period of time. 

Head & Shoulder (2)

Triangles (4 types)

Channels (3 types)

Reversal

Patters

Diamond

Cup & Handle

Rounding Top/Bottom

PATTERNS

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Continuation Patterns

Patterns in security prices occur daily.

price patterns may be easy to understand & see on paper

But

much harder to spot, and trade these formations in real time.

But If you Spot

YOU GAIN MORE & more…

TOPS/Bottoms

Double/Triple

Flags (2) types

Pennants

Wedges

venKEY


Head shoulders

Patterns price direction. 

Head & Shoulders

Bearish Reversal

- Creates on top of the chart

- Some times-Irregular appearance

Left Shoulder:Bulls push prices upwards making new highs; however these new highs are short lived and prices retreat.

Head: Prices don't retreat for long because bulls make another run, this time succeeding and surpassing the previous high; a bullish sign. Prices retreat again, only to find support yet again.

Right Shoulder:The bulls push higher again, but this time fail to make a higher high. This is very bearish, because bears did not allow the bulls to make a new higher or even an equal high. The bears push prices back to support (Confirmation line); this is a pivotal moment - Will bulls make another push higher or have the bears succeeded in stopping the move higher.

NECK-LINE - A level of support or resistance found on a head and shoulders pattern that is used by traders to determine strategic areas to place orders.

Each peak of a regular head and shoulders pattern falls toward a support level, also known as a neckline, before it rises to create the next peak.

A move below the neckline (in the case of a head and shoulders top) is used by traders as a signal of a reversal of the current uptrend. 

PATTERNS

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  • Head and Shoulders - Sell Signal

  • If prices break the confirmation support line, it is clear that the bears are in charge; thus, when price closes below the confirmation line, a strong sell signal is given.

    • Note that a downward sloping confirmation line is generally seen as a more powerful Head & Shoulders pattern, mainly because a downward sloping confirmation line means that prices are making lower lows.

venKEY


Inverted head shoulders

Patterns price direction. 

Inverted Head & Shoulders

Must confirm with VOLUMES

The reasoning behind a Head & Shoulders pattern is as follows:

Left Shoulder:Bears push prices downwards making new lows; however, bulls begin to return and push prices slightly higher.

Head:Price gains don't last long before bears return and push prices even lower than before; a bearish sign. Prices then find buyers at the new lower prices.

Right Shoulder:The bears push downward again, but this time fail to make a lower low. This is generally seen as bullish sign, bears were unable to push prices further down. Decision time occurs when the price is pushed higher back to support (Confirmation line); either bears will push prices back down or bulls will push prices higher, regaining control of the stock, future, or currency pair.

Bullish Reversal

This pattern is also known as a

"reverse head and shoulders"

Stop Loss = WEEKLY LOW

Reverse Head and Shoulders Buy Signal

When price closes above the confirmation line, a strong buy signal is given.

Usually an upward sloping confirmation line is seen as a more powerful Reverse Head & Shoulders pattern, mainly because an upward sloping confirmation line means that prices are making higher highs.

PATTERNS

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Reverse Head and Shoulders

The opposite of the Head & Shoulders pattern is the Reverse Head & Shoulders pattern which is another strong pattern, this time a bottoming pattern

Volume analysisis important when using the Head & Shoulders chart pattern. How to incorporate volume into the study of the Head & Shoulders pattern is discussed next.

Volume and Head and Shoulders

When the confirmation line of a Head & Shoulders pattern breaks to the downside, a large amount of volume should occur as well.

The chart below of General Electric (GE) shows a sharp increase in volume when the confirmation line of the Head & Shoulders pattern was broken:

venKEY


Forex2tradeindia

Patterns price direction. 

TRIANGLES

1. Ascending Triangle - When the upper trendline is horizontal and the lower trendline is rising with higher lows.

2. Descending Triangle - When the lower trendline is horizontal and the upper trendline is descending with lower highs.

4. Inverted Triangle - When the upper and lower trendlines converge at roughly the same angle without touching each other.

PATTERNS

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A triangle needs a minimum of four points (price ‘tests’) to be valid – two upper tests and two lower tests, which is the same definition for establishing a valid trendline.  The significance of a triangle is similar to that of trendline significance and validity.

Classic Technical Analysis teaches that Symmetrical Triangles are more frequently Continuation Patterns than Reversal Patterns, and that Ascending Triangles are “Bullish” while Descending Triangles are “Bearish.”

3. Symmetrical Triangle - When the upper and lower trendlines converge at roughly the same angle.

venKEY


Forex2tradeindia

Patterns price direction. 

ASCENDING Triangle

Bullish Reversal & Continuation Pattern

Assumptions of ASCENDING Triangle :

If Ascending Triangle is made up of 2 trend lines where (1) upper one is flat and (2) lower one is diagonal.

The line reflects the psychology that sellers are interested to sell at a particular price… WHERE as rising trend line tells us the BUYERS are interested to buy at the higher price.It is basically a war between

WEAK SELLERS vs. STRONG BUYER

Target

- Entry

2/3 distance

-- Stop Loss

Measure

PATTERNS

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How to trade with Triangle :

The Tri-angle has to be divided into 3 parts such as a,b,c.

If it take a fresh break-out at 2/3rd part or from “b” it creates NEW TREND

Measuring Indications :

Measure the height (base) of the said pattern. And project the same distance from the point of BREAK-OUT

venKEY


Patterns

DESCENDING price direction. Triangle

Patterns

Bearish Reversal & Continuation Pattern

Measure

Assumptions of DECENDING Triangle :

If Ascending Triangle is made up of 2 trend lines where (1) Lower one is flat and (2) Upper one is diagonal.

The line reflects the psychology that SELLERS are interested to SELL at a particular price… WHERE as diagonal down trend line tells us the Sellers are interested to SELL at the LOWER price.It is basically a war between

WEAK BUYERS vs. STRONG SELLER

-- Stop Loss

2/3 distance

- Entry

Target

PATTERNS

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How to trade with Triangle :

The Tri-angle has to be divided into 3 parts such as a,b,c.

If it take a fresh break-out at 2/3rd part or from “b” it creates NEW TREND

Measuring Indications :

Measure the height (base) of the said pattern. And project the same distance from the point of BREAK-DOWN

venKEY


Patterns1

SYMMETRICAL price direction. Triangle

Patterns

  • Characterized as IN-DECISION

  • Market in PAUSE

  • The future of the market is QUESTIONED

Target

2/3 distance

Measure

-- Stop Loss

PATTERNS

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Assumptions of Symmetrical Triangle :

If Ascending Triangle is made up of 2 trend lines where (1) Lower one Diagonal and (2) Upper one is diagonal.

It is basically a war between

WEAK BUYERS vs. WEAK SELLER

Measuring Indications :

Measure the height of the said pattern. And project the same distance from the point of Break-out / Break-Down

Advice : Confirmation with other Indicators (RSI, MACD, Stochastic),

Note : VOLUME should support trend

venKEY


Forex2tradeindia

Patterns price direction. 

CHANNELS

Ascending Channel

Descending Channel

Horizontal Channel

Up Channel

Down Channel

Sideways channel

HigherHighs & Lows

Lower Highs & Lows

Ranging Highs & Lows

To create a Sideways (Horizontal) channel, simple draw a Horizontal lines at the frequent created Highs & Lows.. Which shall almost near / around price range trading.

To create an up (ascending) channel, simply draw a parallel line at the same angle as an uptrend line and then move that line to position where it touches the most recent peak.

To create a down (descending) channel, simple draw a parallel line at the same angle as the downtrend line and then move that line to a position where it touches the most recent valley.

PATTERNS

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Mostly @ top of CHART

May appear @ Bottom/Top of the CHART

mostly appear from bottom of the CHART

Important things to remember about trend lines:

When constructing a channel, both trend lines must be parallel to each other.

Generally, the bottom of channel is considered a buy zone while the top of channel is considered a sell zone.

Like in drawing trend lines, DO NOT EVER force the price to the channels that you draw! A channel boundary that is sloping at one angle while the corresponding channel boundary is sloping at another is not correct and could lead to bad trades.

venKEY


Forex2tradeindia

Patterns price direction. 

ASCENDING Channel

Ascending Channel :

An ascending channel is the price action contained between upward sloping parallel lines.

Higher pivot highs and higher pivot lows are technical signals of an uptrend.

Trendlines frame out the price channel by drawing the lower line on pivot lows, and the upper line is the channel line drawn on pivot highs.

Price is not always perfectly contained but the channel lines show areas of support and resistance for price targets. A higher high above an ascending channel can signal continuation.

A lower low below the low of an ascending channel can signal trend change.

When prices hit the bottom trend line, this may be used as a buying area. When prices hit the upper trend line, this may be used as a selling area.

Pretty easy to see now with this stock chart how a ascending channel actually looks.

Now, my lines aren't perfectly parallel, but I think you get the idea.

Investing in stocks using this technique is fairly simple when playing a long term channel like the one above.

If the stock breaks the channel's top, then that is a bullish sign as higher prices or possibly even a steeper ascending channel is to follow.

On the flip side, if the channel is broken to the downside, it is a bearish sign of possibly lower prices to come.

PATTERNS

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How to trade :

If price breaks above the ascending price channel, it may be the start of aParabolic move. Usually when price breaks above the ascending channel, it is a sign that the whole world is interested in the stock.

Price may move rapidly upwards. These kind of moves does not last for long. If you own the stock, you may want to consider selling some of your positions as the stock climbs higher.

venKEY


Forex2tradeindia

Patterns price direction. 

DESCENDING Channel

Descending Channel :

A descending channel is the price action contained between downward sloping parallel lines.

Lower pivot lows and higher pivot lows are technical signals of an uptrend.

Trendlines frame out the price channel by drawing the lower line on pivot lows, and the upper line is the channel line drawn on pivot highs.

Price is not always perfectly contained but the channel lines show areas of support and resistance for price targets. A higher high above an descending channel can signal continuation.

A Higher high above the high of a descending channel can signal trend change.

Pretty easy to see now with this stock chart how a descending channel actually looks.

Now, my lines aren't perfectly parallel, but I think you get the idea.

Investing in stocks using this technique is fairly simple when playing a long term channel like the one above.

If the stock breaks the channel's lower, then that is a bearish sign as lower prices or possibly even a steeper descending channel is to follow.

On the flip side, if the channel is broken to the upside, it is a bullish sign of possibly higher prices to come.

PATTERNS

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How to trade :

If price breaks above the decending price channel, it may be the start of aParabolic  move. Usually when price breaks above the decending channel, it is a sign that the whole world is interested in the stock.

Price may move rapidly upwards. These kind of moves does not last for long. If you own the stock, you may want to consider selling some of your positions as the stock climbs higher.

venKEY


Break out break down

Patterns price direction. 

Horizontal Channel

Break-out / Break down

The Horizontal Channel

The horizontal channel is either a reversal or continuation pattern, but it's impossible to tell which until the pattern is completed with a breakout, either down or up. The pattern is similar to the head and shoulders pattern. Notice that the volume decreases gradually over the span of the pattern, a characteristic common to triangles and head and shoulders patterns as well as to horizontal channels. Indecisive trading gets exhausted.

As in triangles, the breakout can occur to the upside or to the downside. But the upside breakout has to be accompanied by a solid increase in volume. If the volume isn't impressive, relative to the previous days or weeks of trading, the breakout is suspect.

For a downside breakout, the volume doesn't have to be heavy. There will likely be an initial surge in volume as traders sell their shares, anticipating a decline, but prices generally tend to fall of their own weight. In other words, there will likely be sellers, but not likely many buyers.

Horizontal ChannelPrice is framed out in a trading range by the pivot highs (resistance) and pivot lows (support). Trendlines drawn on pivots give a visual picture of price action. A new high in price above the horizontal channel is a technical buy signal. A new low in price below the horizontal channel (or rectangle pattern) is a technical sell signal.

PATTERNS

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Support

Resistance

Patterns

venKEY


Forex2tradeindia

Patterns price direction. 

DIAMONDPattern

Diamond Chart Pattern :

A diamond chart formation is a rare chart pattern that looks similar to a head and shoulders pattern with a V-shaped neckline. Diamond chart reversals rarely happen at market bottoms, it most often occurs at major tops and with high-volume. Since diamonds are a variation of head and shoulders tops, you have to resist the desire to classify every head and shoulders top as a diamond formation. The reason you will want to avoid this is because the diamond will signal a break in trend much earlier than a head and shoulders pattern, which could result in a premature short position. To calculate the breakout potential for a diamond formation, you will want to take the distance between the highest and lowest point in the diamond formation and add it to the breakout point. However, in most occurrences a breakout from the diamond chart formation will carry stocks much further.

PATTERNS

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venKEY


Tops bottoms

Double/Triple Bottom price direction. 

Tops/Bottoms

Double Bottom

Common & highly effective price reversal pattern.

To create a double bottom pattern, price begins in a downtrend, stops, and then reverses trend. However, the reversal to the upside is short-term. Price breaks again to the downside only to stop again and reverse direction upwards. With the second bottom of the double bottom pattern, it is usually more bullish if the second low is higher than the first low.

Double Bottom Buy Signal

The signal to buy is given when the confirmation line is penetrated to the upside. The confirmation line is drawn across the top of the double bottom pattern (see chart above).

Often, after price penetrates the confirmation line, price will retrace for a short time, sometimes back to the confirmation line. This retracement offers a second chance to get into the market long.

Volume also plays an important part of interpreting the Double Bottom pattern; this is illustrated in the chart above

Generally, volume should explode when the confirmation line is penetrated as it did in the above chart.

PATTERNS

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The Double Bottom reversal pattern is a heavily used and effective charting reversal pattern.

……………………………………

Another similar and popular bottom reversal pattern is the Reverse Head & Shoulders Pattern (see: Head & Shoulders).

…………………………………

The opposite of the Double Bottom is the bearish Double Top pattern

(see: Double Top).

venKEY


Tops bottoms1

Double/Triple TOP price direction. 

Tops/Bottoms

Double Bottom

Common & highly effective price reversal pattern.

Double Top Sell Signal

Sell when price closes below the confirmation line.

Note that traders expect a significant increase in volume to accompany the confirmation line break; if there is very little volume when price pierces the confirmation line, then the move downward is suspect. Small volume usually means weak support of price movement

Double Top Formation Components

First High: Bulls push prices upwards making new highs; however, these new highs are short lived and prices retreat.

Second High: Prices don't retreat for long because bulls make another run, making a similar high. Nevertheless, this is bearish, because bulls were unable to push prices higher; bears held their ground at the previous high level. The bears push prices back to support (Confirmation line); this is a pivotal moment - either bulls will make another push higher or bears will take control and push prices even lower, more than likely taking over for good.

PATTERNS

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The Double TOP reversal pattern is a heavily used and effective charting reversal pattern.

………………………………………………

Another similar chart pattern is the Head & Shoulders Pattern (see: Head & Shoulders). ………………………………………………

The opposite of the Double Top is the bullish Double Bottom (see: Double Bottom).

venKEY


Forex2tradeindia

Patterns price direction. 

CUP & HANDLE Pattern

PATTERNS

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venKEY


Forex2tradeindia

Patterns price direction. 

INVERTED Triangle

PATTERNS

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Assumptions of ASCENDING Triangle :

It has no much Technical Importance… how ever we can trade it with confirmation of other Indicators

http://www.forex-tribe.com/Apprendre_figures_chartistes.php#_creuxensoucoupe

venKEY


Flags
Flags price direction. 

Bullish Flag

Bearish Flag

  • Flag and pennants are one of the most trusted continuation patterns)

  • Flags and pennants can be categorized as continuation patterns.  They usually represent only brief pauses in a dynamic market.  They are typically seen right after a big, quick move.  The market then usually takes off again in the same direction.  Research has shown that these patterns are some of the most reliable continuation patterns.

  • Flags are divided into 2 categories :

  • Bullish flags - Bullish flags are characterized by lower tops and lower bottoms, with the pattern slanting against the trend. But unlike wedges, their trendlines run parallel.

  • Bearish flags- Bullish flags are characterized by lower tops and lower bottoms, with the pattern slanting against the trend. But unlike wedges, their trendlines run parallel.

  • Pennants look very much like symmetrical triangles.  But pennants are typically smaller in size (volatility) and duration.  

PATTERNS

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venKEY


Wedges

Pennants price direction. 

Wedges

Pennant is short-term continuation stock chart pattern(compare with Flag) , lasting for one to three weeks normally.

It arise after a sharp stock price movement, when the bulls or bears take a break before they continue to push further in the same direction.

Pennant with converging trend lines looks much like symmetric triangle, the flag pattern with two parallel trend lines looks much more like a channel. The pattern is considered to complete, when the trend line in the direction of the basis trend is broken.

Wedge

A wedge pattern is similar to symmetric triangle - it can be a continuation or reversal pattern, with two differences.

While the triangle shows sideways movement, the wedge can move either upward (normally bearish sign) or downward (normally bullish sigh). The other difference is that wedge normally takes much longer to complete then triangle, usually between three and six months.

PATTERNS

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venKEY