A GUIDE FOR BEGINNERS
.The above continuation patterns are the bull and the bear flag.
.These patterns are spotted in a bullish or bearish trend, forming the corrective phase in a trending market.
.They are called flags because the pattern resembles a flag on a pole.
. These patterns outline impulsive price movements to the upside and to the downside.
.These patterns are very common within the markets and you will see a lot of opportunities in these flag formations.
.Triangle is another form of a continuation pattern and it is rare to find picture-perfect
patterns within the charts.
.The expanding triangle. As a flag continuation pattern would retain its general parallel structure,
the expanding triangle broadens as price action develops.
.This pattern results in a very nice risk-to-reward ratio.
.The rising wedge reversal is one of the most common patterns. Price action is approaching the top
of the structure and this pattern signals the opportunity for a sell.
.The probability of this pattern playing out is the increase of touches.
.The falling wedge is the same, as the price approaching the bottom of the structure
signaling an opportunity for a buy.
.Both the rising and falling wedge patterns are seen commonly on the charts.
.The ascending channel is a reversal pattern.It allows you to capitalize on very large risk-to-reward positions if you apply the
perfect entry and risk management.
.The third touch at top of this pattern represents a high-value area for a sell.
.The descending channel allows you to capitalize in the same way with a buying opportunity.
.Price moves to the downside in a clear channel before finally reversing.
.The more touches on this channel, the more probable it is of playing out
and playing out impulsively to the upside
.The head and shoulders don’t form always but can be used as another confirmation to enter trades.
.Price forms the left shoulder retraces to the ”neckline”, test higher to form the head of the pattern,
test the neckline once more before forming the right shoulder of the pattern and breaking lower.
.Price has now ”rejected” this area 3 times and increases the probability of heading to the downside.
.The inverse head and shoulders are the same, just the opposite.
.Three rejections of a certain area or structure added evidence to look for buying opportunities within the position.
.The double bottom reversal pattern is price testing the same area twice and
confirming a certain structure or level.
.It signifies a buying opportunity.
.The double top is the same, just the opposite.
Price comes back up to test the same area for the second time-confirming the opportunity
for a sell to the downside.
.Both double bottoms and double tops can also form triple bottoms and triple tops.
THERE ARE STILL A LOT OF PATTERNS THAT YOU CAN TRADE, BUT LESS IS BETTER. IF YOU FOCUS ON ONLY A FEW PATTERNS, YOU WILL BE LESS DISTRACTED AND MORE PROFITABLE.