Forex charts and chart patterns are basic forex trading tools used by forex traders to detect major currency movements and fluctuations before they occur. It fundamentally helps a forex trader to spot good trading conditions where the forex market is ready to break out. Chart patterns in forex trading help to detect if a currency price will lead on in its current direction or converse. Every information gotten in chart patterns helps forex traders to maximize profit, avoid losses and manage the risk associated with the currencies being traded.
TYPES OF CHART PATTERNS IN FOREX TRADING
DOUBLE TOP AND BOTTOM
In this chart pattern, the identified quote for a particular currency or investment moves in accordance with the alphabetic word W (double bottom) and M (double top). This chart patterns analysis is used by forex traders as a technical analysis in the explanation of various currency movements and as a part of a forex trading strategy to exploit periodic patterns.
HEAD AND SHOULDER CHART PATTERN
This chart pattern is used by forex traders in trading and viewed as a technical indicator and includes a reverse pattern in which when produced, indicates that a currency or security is most likely to move against the preceding trend. They are basically two types of head and shoulder chart pattern namely the head and shoulder top chart pattern that once presented, indicates the absolute fall of a currency’s price and the head and shoulder bottom pattern which designates the rise in the price of a particular traded currency.
RISING AND FALLING WEDGES
This is a unique forex trading chart pattern that relates a reverse of those selected currency or security developed within a wedge. The shape a wedge is in correlation with that of a symmetrical triangle in that it is made of the support and the resistance trend lines that specify the price of a currency or security.
BULLISH AND BEARISH RECTANGLE
The bullish and bearish rectangle that is used by a good number of forex traders. this unique forex trading chart pattern is developed when a currency price remains static in the period of a strong trend and briefly bounces in the space of two parallel levels and then continues. This also has a bullish and bearish pennant that gives a forex trader the opportunity to trade long on a currency and make a profit from the rise in prices.
TRIANGLE (SYMMETRICAL, ASCENDING AND DESCENDING)
Triangles as a form of chart pattern are of three types. The symmetrical triangle is a continuation pattern that indicates a state of consolidation in a currency trend trailed by a resumption of the previous trend. This chart pattern is produced by the union of a downward line and an upward support line. The ascending triangle is seen as a bullish pattern that indicates the high movement of a currency price upon completion. The descending triangle is seen as a bearish pattern that indicates the downward movement of a currency price upon completion.
TYPES OF FOREX CHART
THE CANDLESTICK FOREX CHART
A candlestick forex chart is a tool that helps forex traders to better understand the emotions involved in every currency day price. This forex charts includes various forex trading parameters like open, high, low and close trades. The main body displays the conviction of the currency pairs while the wick shows a forex trader an overstretched emotion that may not hold. In a candlestick forex trading chart, if the candle’s main body is identified to take a major percentage of the candle, it specifically shows a trend candle and this reason is because a currency trade price closes near the ended period but if the wick is seen to possess a greater number of the candle, it specifically indicates some flashing lights that warns a forex trader to stop a particular trade if trading with a trend.
THE BAR FOREX CHART
This bar forex chart provides the same type of forex trading information regarding the currency pairs as the candlestick forex chart. Aside from this similarity, a bar forex trading chart displays various open, close, high and low trends without any need for color indications. The information provided by these trading parameters are very vital to forex traders and the colorless bearings make it easy to identify trades options.
THE LINE FOREX CHART
The line forex chart has the characteristics of producing the smallest amount of data. But it has the ability to generate information on the close parameter and most forex traders regard this information as the most important price of a day’s trade. The simplicity of the line chart is much needed in well-defined forex market trends, therefore, forex traders consider it as a winning trademark and adequately use it for various kind of trades they venture into.