What Are Forex Chart Patterns: A Detailed Guide 2022

By Author: FXlearnpro
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Forex Chart Patterns
The traders of the forex market have various indicators, tools, and what not to analyse the market. These are used to predict market movements of prices and other factors impacting the trading instrument. In a forex trade, the forex charts patterns are useful to trade indicators.
Traders use the forex charts patterns to have a deep analysis of the market movements of trade instruments. The movements or fluctuations in the forex currency pairs are represented on charts in pattern form to have a look at the market and what could be the possible next move.
Thus, having prior knowledge makes it worth investing in the forex market. The forex charts patterns are an essential part of the technical analysis. But traders have to use them with proper practice and trade experience, as novice traders won't get the patterns formed and may make wrong decisions. Therefore, the practice and forex trade knowledge is a must for effective trading.
Forex charts patterns are the price patterns that are viewed through charts graphing the prices of the currency pairs. When the forex market makes movements ...
... daily, they form certain patterns that repeat in specific situations. A forex trader analyses the forex charts patterns by studying the patterns on charts formed.
The forex charts patterns are used either for a reversal in the trend or for the continuation of the ongoing trend of the forex market. Thus, helping traders decide whether they should open a trade position or close the existing position.
Being a technical analysis, the chart patterns are divided into three categories, namely, traditional chart pattern, harmonic chart pattern, and candlestick chart pattern.
The traditional chart patterns are the most common forex chart patterns that have been used in the forex market for years. Examples of traditional chart patterns are double top reversal, double bottom reversal, etc.
Harmonic chart patterns are the patterns of the forex market that use the Fibonacci ratio to quantify and validate the forex chart patterns. Examples of harmonic chart patterns are butterfly, cypher, etc.
Candlestick patterns are the most used forex chart patterns that help traders understand the forex market movements in prices. Examples of candlestick patterns are a hammer, morning star, etc.
However, there are no best or perfect forex charts patterns; traders decide the chart patterns based on the trade instrument and the market. Here, we have some of the forex charts patterns that are mostly used in forex trading discussed:
Head and Shoulders Pattern
A forex chart pattern is built on the charts to analyse the price pattern of the trade. The head and shoulder pattern has a high peak with two lower peaks on both sides. The peaks formed help forex traders forecast the bullish and bearish patterns of the market reversal.
There are three peaks in the pattern; the first and third peaks are small, with the middle and the second peak is higher. But gradually, all the three peaks fall in the same level of support, which is referred to as the neckline. When the third peak falls back to support level, it is said that it will break out into a bearish downtrend.
Double Top
A trend reversal pattern of the forex market, the double top, is used to highlight the trend reversal of the market. The price of the currency traded will increase and reach a peak before leveling back to the support level. The trend moves back again and then takes reversal against the trend going.
Double Bottom
It is a forex chart pattern that shows the selling period that traders can use; the price of the currency falls low and below the support level. Thus, the trader gets the period of time in which they can sell the currency pair. The price then moves high to the resistance level and drops again.
In the end, there is a reversal that brings an upward movement in the price, and the market becomes bullish. So, the double bottom is a bullish reversal pattern with a downward trend and then a shift upwards.
Cup and Handle
It is a candlestick pattern that shows the bullish continuation pattern of the market. Through this, traders understand the bearish market emotion before the trend completely continues in a bullish motion. The chart pattern forms the shape of a cup and handle.
In this, the price of the currency enters the retracement phase temporarily and forms the handle of the pattern. The retracement has two parallel lines formed on the graph, and the price of the currency then reverses, comes out of the handle shape, and continues with a bullish trend.
Wedges
The forex chart pattern shows the price movements of the currency being tighethen in between the two sloping trend lines. The wages are of two types basically, rising and falling. The rising wedge is represented when the trend line is caught between the two upward lines of support and resistance.
In the rising wedge, the support line is steeper than the resistance line. The pattern formed indicates a decrease in the price of the currency permanently, which is shown by the support level breaking.
On the other hand, the falling wedge takes place between the downward sloping levels. In this case, the resistance line is steeper than the support one, and the falling wedge indicates a rise in the currency price and breaks in resistance level. Both the rise and fall of the wedge are a signal of reversal, where the rising wedge shows a bearish market and the falling wedge shows a bullish market.
Flags
In the forex trade, the flags are formed when the prices of the currency traded consolidate after a sharp trending move. The preceding sharp trending move is termed the flagpole. Forex market traders use-flags and flagpoles to analyse the market trends.
When there is an upward trend, then a flag pattern is formed where the prices consolidate, forming lower highs and lower lows. It has a single period of profit-taking. When there is a break outside of the upper falling trendline, then it signals that the bulls are ready to drive the prices higher for the coming phase.
Conclusion : Forex Charts Patterns
A trader of the forex market can use an enormous number of patterns to trade. All the above-discussed and not-mentioned chart patterns are useful for analysing the market and predicting the future market trend. Traders can get access to the tools and platforms via online brokers.
There are several online forex brokers that provide services to ease the trading process, Visit InvestFW! as mentioned before is one of the online forex brokers with a high market reputation.

I'm a Financial writer at: https://fxlearnpro.com/