In forex trading, identifying chart patterns is a powerful skill that can help you forecast future price movements. But with so many patterns out there, where should you begin?
Let’s simplify it.
Chart patterns are broadly classified into three main categories: Reversal, Continuation, and Bilateral patterns.
Knowing the difference between them can help you make smarter, more profitable trades.
Reversal patterns signal a change in the current trend direction.
Trading Tip:
Place your trade beyond the neckline in the direction of the reversal. Set your target to match the height of the pattern, and place your stop-loss halfway between the pattern’s high and low to manage risk.
Continuation patterns indicate a pause in the trend, followed by a likely continuation in the same direction.
They reflect temporary consolidation before the trend resumes.
Trading Tip:
Enter trades at the breakout point—either above or below the pattern—depending on the existing trend. For wedges and rectangles, target at least the height of the formation. For pennants, target the length of the prior trend (the mast).
Set stop-loss orders just beyond the opposite end of the pattern for protection.
Bilateral patterns are neutral—they signal that price could break in either direction. These patterns reflect a market in indecision.
Trading Tip:
Place both buy and sell stop orders above and below the formation. Cancel the opposite order once one gets triggered. Be sure to avoid placing entries too close to the triangle’s edges to minimize the chance of false breakouts.
Always use a stop-loss just outside the pattern to protect your trade.
Chart patterns are your visual roadmap to price behavior. They help answer key trading questions:
✅ Reversal patterns = trend change
✅ Continuation patterns = trend pause and resume
✅ Bilateral patterns = either direction breakout
The more familiar you are with these formations, the better you’ll be at spotting high-probability setups in real time.
👉 Keep practicing. Keep analyzing.
And keep visiting www.dailyforex.pk for updated forex strategies, chart analysis, and education.
Stay Educated with Daily Forex Pakistan.
Gold prices remain resilient within a narrow trading band, supported by soft inflation data and…
The Pakistani Rupee (PKR) commenced Monday's trading session with a slight depreciation against the US…
PurityPrice per Tola (PKR)Price per 10 Grams (PKR)24KRs. 346,800Rs. 297,33022KRs. 317,900Rs. 272,55221KRs. 303,450Rs. 260,16418KRs. 260,100Rs.…
Discover how a crypto trading journal can improve your performance, track mistakes, and boost consistency…
While the standard pivot point formula is the most commonly used, it’s not the only…
Learn 3 proven risk management strategies for crypto trading beginners to reduce losses and protect…