Trading Classic Chart Patterns The Easy Way

Trading Classic Chart Patterns The Easy Way-Charting has always been used as a way to analyze and prediction for forex and is part of technical analysis. It is based exclusively on the study of patterns by trend lines plotted on a price chart and candlestick chart formations.

Trading Classic Chart Patterns

Charting has three principles which are:

1. All factors or elements that affect the currency pair are reflected in price.
2. Price always move in trend.
3. Patterns created from price movements are always repeating itself.

A trader that studies the price will be able to identify clearly the trend of a particular currency pair and anticipate its changes as well. Therefore, future probable behavior can be predicted.

The problem is that although traders may be able to identify these patterns but trading them requires some skill and patience which most traders struggles with.

Here we will list a few classic chart patterns and recommend how a trader can trade them in a easy way.

• Reversal Patterns
• Double tops or bottoms
• Head and Shoulders/ Inverted Head and Shoulders
• Falling and Rising Wedges

These formations are normally trend reversal patterns that are highlighted by the breaking of key support of resistance levels caused the formation of the pattern.

Continuation Patterns

• Flags 
• Pennants
• Symmetrical Triangle 
• Ascending Triangle 
• Descending Triangle 
• Rectangle 
• Price Channels

These formations are normally trend continuation patterns where prices will go into consolidation for awhile after a period of continued trend movement to take up more momentum and continue its trend.

Although these chart patterns can be easily found in any forex books and explained in detail, traders always faced the problem of 1) identifying and 2) executing trade using these patterns.

How can these problems be solved?

For identification, a trader can opt to use a chart pattern recognition service such as Autochartist which provides chart pattern signals and its trade potential. He can also opt to use his broker's report or resource tools for advice as well. These services often provide detailed analysis of the trade signals and the quality of the signal produced.

Through the usage of such service, the trader can train himself to identify such patterns on a chart easily. After some time he will able to identify these patterns without the help of these services or simply using these services as a confirmation of his findings.

For easy execution of the chart patterns, a trader has to find ways to automate the process of executing his trade when the signal is right for entry. As charting to identify chart patterns may result in many trend lines, support or resistance levels being plotted, it is hard to sometimes trade off the lines due to limitations of the trading platform. It is advisable to be able to develop or have a forex trading tool that can not only help a trader in his charting process but also the execution of his trades as well.

These solutions will help a trader to ease his burden of having to spend time charting and monitoring his charts where he can now do it easily and automatically with lesser trading stress. Trading classic chart patterns will be easier than before with better quality trading signals and more profitable trades.

Warren Seah

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