FOREX TRADERS

[adamsmiths]

Top 3 Chart Patterns for Trading Foreign Exchange

If you want to invest in the dynamic and volatile foreign exchange market, you can never jump into the market without any prior knowledge and preparation. In this market, currency rates change within seconds. You need to analyse the market in order to become successful in this trading. With the help of a chart pattern, you get to know about the price movement. A chart pattern refers to a distinct formation that appears on the chart and makes a trading signal. It predicts current trends and reversals. You can make the right buying and selling decisions with the help of this chart pattern. A few chart patterns are discussed below that can be highly effective for your financial trading (Information Credit – easyMarkets).

Triangles:
This pattern is one of the most common chart patterns that you can find on charts. In the case of technical analysis, triangles are considered as the most used chart patterns. On the basis of their shapes, triangles can be divided into three distinct types. They are - symmetrical triangles, ascending triangles and descending triangles. You can find the appearance of triangles for several months. The ascending triangle is basically a bullish pattern triangle that indicates an uptrend and descending triangle refers to a bearish pattern that indicates downside breakout. With the help of symmetrical triangles, you can get the signal that the trend will continue to move in the same direction.

Wedges
You can get to know about the reversal or continuation of a trend with the help of wedges chart patterns. This chart pattern is almost similar to symmetrical triangles, the only difference is these patterns slant in a downside or upside direction. Sometimes newbies get a little confused about the chart pattern since the appearance of wedges predicts both continuation and reversal.

Gaps
Another popular chart pattern is a gap. This appears in the vacant space between two trading periods. A gap appears if there is a large price difference between two sequential trading periods. Gap pattern can be identified in the bar charts and the candlestick charts.

Apart from the above three, there are a number of chart patterns available in financial trading. Some of them are head and shoulders, flag and pennant, double tops and bottoms, cup and handle and triple tops and bottoms. One should be familiar with these trading patterns before entering into the foreign exchange market.