Forex Charts Trends

REVERSAL CHART PATTERNS
Reversal patterns are those chart formations that signal that the ongoing
trend is about to change course. If a reversal chart pattern forms during
an uptrend, it hints that the trend will reverse and that the price will head
down soon.
Conversely, if a reversal chart pattern is seen during a downtrend, it
suggests that the price will move up later on.
In this lesson, we covered six chart patterns that give reversal signals. Can
you name all six of them?
If you got all six right, brownie points for you!
To trade these chart patterns, simply place an order beyond the neckline and
in the direction of the new trend. Then go for a target that’s almost the same
as the height of the formation. For instance, if you see a double bottom, place
a long order at the top of the formation’s neckline and go for a target that’s
just as high as the distance from the bottoms to the neckline. In the interest
of proper risk management, don’t forget to place your stops! A reasonable
stop loss can be set around the middle of the chart formation. For example,
you can measure the distance of the double bottoms from the neckline,
divide that by two, and use that as the size of your stop.
CONTINUATION CHART PATTERNS
Continuation chart patterns are those chart formations that signal that the
ongoing trend will resume.
Usually, these are also known as consolidation patterns because they

show how buyers or sellers take a quick break before moving further in the
same direction as the prior trend. Trends don’t usually move in a straight line
higher or lower. They pause and move sideways, “correct” lower or higher,
and then regain momentum to continue the overall trend. We’ve covered
several continuation chart patterns, namely the wedges, rectangles, and
pennants. Note that wedges can be considered either reversal or
continuation patterns depending on the trend on which they form.
To trade these patterns, simply place an order above or below the formation
(following the direction of the ongoing trend, of course). Then go for a target
that’s at least the size of the chart pattern for wedges and rectangles. For
pennants, you can aim higher and target the height of the pennant’s mast.
For continuation patterns, stops are usually placed above or below the actual
chart formation. For example, when trading a bearish rectangle, place your
stop a few pips above the top or resistance of the rectangle.
BILATERAL CHART PATTERNS
Bilateral chart patterns are a bit trickier because these signal that the price
can move EITHER way.
Huh? What kind of a signal is that?! A bilateral signal.
This is where triangle formations fall in. Remember when we discussed that
the price could break either to the topside or downside with triangles?
To play these chart patterns, you should consider both scenarios (upside
or downside breakout) and place one order on top of the formation and
another at the bottom of the formation.
If one order gets triggered, you can cancel the other one. Either way, you’d
be part of the action. Double the possibilities, double the fun!
The only problem is that you could catch a false break if you set your entry
orders too close to the top or bottom of the formation. So be careful and don’t
forget to place your stops too!
Like we promised, here’s a neat little cheat sheet to help you remember all
those chart patterns and what they are signalling.
We’ve listed the basic forex chart patterns, when they are formed, what type
of signal they give, and what the next likely price move may be. Check it out!
CHART PATTERN FORMS DURING TYPE OF SIGNAL NEXT MOVE

Double Top Uptrend Reversal Down
Double Bottom Downtrend Reversal Up
Head and Shoulders Uptrend Reversal Down
Inverse Head and Shoulders Downtrend Reversal Up
Rising Wedge Downtrend Continuation Down
Rising Wedge Uptrend Reversal Down
Falling Wedge Uptrend Continuation Up
Falling Wedge Downtrend Reversal Up
Bearish Rectangle Downtrend Continuation Down
Bullish Rectangle Uptrend Continuation Up
Bearish Pennant Downtrend Continuation Down
Bullish Pennant Uptrend Continuation Up

Forex Charts Trends

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What are the six reversal chart patterns mentioned?

How should one trade reversal chart patterns?

REVERSAL CHART PATTERNS

Usually, these are also known as consolidation patterns because they

Huh? What kind of a signal is that?! A bilateral signal.

CHART PATTERN FORMS DURING TYPE OF SIGNAL NEXT MOVE

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