3.1 Watch Out for Patterns

 
Forex chart patterns tell you which direction you should trade.Here is a very sweet little secret for you. You ready? What if we tell you that you can even trade in Forex market - or for that matter in any financial market - without knowing the nitty-gritties of that market. "Yes", you will say. And then you will probably add "what so great in that statement? Of course we can trade and lose tons of money."
 
Let us put the icing on the cake by telling you that you can trade without knowing the nitty-gritties and still make fare amount of money. You Just Need to Train Your Eyes - Well, "BOTH Eyes" and some times even the THIRD one also.
 
Patterns, Patterns and Patterns.
 
The secret lies in catching on the patterns - and what you need for that is just your eyes - a bit of brains of course.
 
Assume that you were in your junior high school. One day you missed your 6:30 AM bus and took the 6:40 one. And here is she, that cute little face, big blue eyes and a smile which can lighten the night. Oops! Well you are not at that stage, at least during this first sighting, to reach the night level.
 
What you did the very next day was to again miss the 6:30 AM but to take the 6:40 one. And YES, here she was there again. You saw the pattern and started taking 6:40 every day.
 
Now there was this fat, sad girl who used to take the 6:30 bus because of you. She saw that you have been missing for past 2 days and knew that it was over for her. Break Out From the Pattern.
 
Points to be observed on forex charts.
 
 
If you see your Forex charts, you will see a number of patterns and number of breakouts from those. If there is a pattern of resistances and supports then take positions in the direction suggested. Whenever there is a break out then go ahead to take the position in the direction of the breakout i.e. against the direction of the recent pattern.
 
Simple, isn’t it? You are not concerned with about the economy i.e. fundamental analysis and are not applying any technical analysis, right? So no analysis and you are making money, correct? Well, not exactly. These patterns represent the market sentiments and hence sentiment analysis.
 
These patterns can be classified under two categories:
 

Randomly appearing patterns

 
These are resistance and support trend lines, channels under which the price action is contained for some period of times and trend lines during the trends. In fact the trend lines similar to the resistance and support lines. This category of patterns tells you the possible direction but may or may help in predicting the size of the moves.
 

Common chart pattern

 
There are some chart patterns which occur frequently. These are like definite shapes. These help in not only predicting the possible direction but also the possible size of the movement.
 

Shall we go to the next lessons to learn about all these in detail? Let’s GO...

 

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