Price patterns or pattern forex- these are formations on price charts that allow you to predict further price movements. It is believed that the correct models are worked out with a probability of 70%, i.e. out of 10 models for which you open positions, 7 will be profitable, the rest may be unprofitable. Conditional pricing models or forex figures can be divided into two groups: continuation models and reversal models; harmonious trading models can also be distinguished separately.

Basic Forex patterns

Reversal patterns they say that there is an important turning point in the current trend and the trend can reverse at any moment. Continuation models they simply say that there is a pause in the market, after which the movement in the direction of the current trend will continue. The main advantage of working with models is the assessment of the movement potential, and a clear understanding of when the model will not be worked out, in order to close the deal on time in this case.

Forex reversal patterns

If we remember what an uptrend is, it is a directional price movement when each subsequent high and low is higher than the previous one. At some point in time, the price no longer shows a new high and when the minimum is broken, the trend changes. This point can be justified using a reversal Forex head and shoulders patterns.

Or is it also called Pattern Shark, is another unique Forex graphical model with roots from. The model is usually defined using Fibbonacci levels; followers of this type of trading attach special importance to these levels. At first glance it may seem that the model is very similar to or even with, but there are serious features here that allow us to highlight model "Shark" separately.

The structure of the pattern itself is unique, we either determine it using Fibonacci retracement levels or with experience simply by looking at the chart. Followers of harmonious trading note that an important level is the area of ​​50% retracement of the entire movement, but this is not so important; rather, it is important to identify the model on smaller time intervals and enter according to it.

Dragon pattern very similar to the “Double Top”. In fact, the dragon pattern is just an improved double top pattern. The author just added Fibonacci levels to clearly identify the model and slightly improved the entry into the market. As a result, the dragon model actually became much better and the inputs had smaller stops. We'll tell you how this happened below.

Double Top Pattern

Forex reversal pattern “Double Top”. It is formed when the price tests the resistance level twice and then breaks through the support. The model represents the letter "M". Breaking through the support level can be used as a signal to sell a financial instrument. The model occurs quite often.

The “Double Bottom” pattern is formed at a time when the price cannot break through the support level and, after an unsuccessful test, breaks through the resistance level. To determine the target, the distance from resistance to support is taken and calculated from the point of upward penetration.

Triple Top Pattern

A variation of the Head and Shoulders pattern is the Triple Top reversal pattern. While in the Head and Shoulders pattern the middle is higher than the other two peaks, in the Triple Top pattern all the peaks are at the same level. Once support is broken, sales of the financial instrument can be considered. It is worth noting that this model is quite rare.

The “1:1” model is based on the concept of market symmetry - a kind of identical price movements, in which we can say that this particular movement can be repeated with a high degree of probability. The “1:1” pattern itself was invented and described by the author Bryce Gilmore, but we can find similar points in the Adverza tactics and in Igor Sayadov.

Symmetrical Triangle Pattern

It is worth noting that a symmetrical triangle can be broken both down and up, i.e. it can be both a continuation pattern and a trend reversal pattern. The sides of the triangle must converge; the pattern itself ends only when the price breaks through the side of the figure. An additional signal is the moment when the price does not reach one of the sides of the triangle, after which there is a strong movement in the opposite direction.

Ascending Triangle Pattern

As a rule, this triangle pattern is characteristic of an uptrend and indicates that there are many more buyers than sellers and they are stronger. When the upper boundary of the model is broken, a strong upward movement usually occurs. Some traders accumulate positions even at the moment of formation of such a triangle.

Descending Triangle Pattern

A descending triangle is characterized by the following characteristics: the lower border is horizontal, acts as a support level, the upper border is directed downward. As a rule, this triangle pattern is characteristic of a downward trend and indicates that there are many more sellers than buyers and they are stronger. When the lower boundary of the model is broken, a strong downward movement usually occurs.

Flag Pattern

As a rule, the formation of a model is preceded by a strong trend, the moment of formation - these models are just a correction before the subsequent market breakthrough. When forming the “Flag” model, sales are considered when the channel boundary is broken, or when the minimum is broken if the flag is downward or the maximum if the flag is upward. The goal is the distance of the flagpole from the point where the “flag” was broken through.

Pennant pattern

The hardest part of candlestick market analysis is remembering all these Forex chart patterns. There are probably hundreds of them. The main ones are discussed below.

The first thing you need to know about patterns

This is a combination of several candles. There is no exact figure, because the full formation of many patterns can occur only after the closure of several dozen bars. Their size, position and general shape can indicate two options for market development: continuation of the trend or its reversal.

Models are divided into 2 categories:

1. Continuation patterns are usually created during periods of consolidation.
2. Reversal patterns allow you to notice a possible trend reversal faster than indicators. A priori, trading on a trend reversal is considered more risky, so be sure to follow risk management.

It is more effective to work with graphical models on timeframes above H1. Candles with a period of up to an hour are based on less information. Therefore, it is better to use them to confirm signals.

Forex pattern indicator

It is almost impossible for a beginner to remember all or at least most of the figures at once, especially. And even if you remember how they should look in theory, you will most likely start to get confused on the chart.

Therefore, to get started, use the Candles_Star indicator for MetaTrade4. Download it and install it in the terminal.

It’s difficult to work with him for the first few minutes due to his busy schedule. But he finds the models himself and displays them on the screen.

Absorption

The Absorption pattern consists of two or more bars and indicates a possible market reversal or completion of a correction.

The first part of the absorption is one or more small candles. The second is a long candle, the body of which overlaps the previous bars, supposedly consuming them.

The signal indicates a possible price reversal towards absorption.

Please note that if you enter the market according to each formed pattern, you will exit it with losses. The model should only be used at the peak of a trend or during periods of end of consolidation. Therefore, it is better not to trade without confirmation.

It is better to use this model as an additional signal in a ready-made trading system.

Doji

The Doji pattern is just one candle. It differs from the others in its almost complete absence of body and almost uniform wicks in both directions.

The formation of such a pattern on the chart indicates uncertainty. Perhaps the current price suits both bulls and bears, which is why there is no significant change in quotes. Perhaps psychologically important price levels are being tested or there are simply no players in the market.

This means that if there is uncertainty in the market, you should not make entry forecasts without additional confirmation. Therefore, wait not only for the doji pattern to close, but also for several candles after it.

A simple way to work with doji. This disembodied candle appeared on the chart. In front of it we see a downward bar, and the next one begins to move upward and eventually closes above the upper shadow of the doji. This is a signal to open a long position.

If the candle before the Doji was ascending, and then began to move downward, you need to short.

The screenshot above shows not the best example. Yes, the signal worked, but in such situations you can often make a mistake with the entry. It is better to enter at the turn. That is, we buy at the minimum and sell at the maximum. The screenshot shows a continuation of the upward trend.

Pennant

The Pennant pattern can consist of more than a dozen bars. And the figure itself is 2 main elements.

1. A flagpole is one or more long candles closed in one direction.
2. The pennant itself. It is built using support and resistance levels that narrow, forming a small triangle.

Support and resistance levels are built based on local minimums and maximums, respectively.

The flagpole itself can be flat or directed slightly up or down - it doesn’t matter. This is approximately what Pennant looks like on the chart.

The figure shows that there was an impulsive price jump, after which a rollback occurs, or the market simply freezes for a while, after which the trend continues.

The pennant is a continuation pattern. You need to enter the market after breaking through the resistance level on a bullish pennant and after breaking through support on a bearish pennant.

Forex pattern 123 in candles

Standard graphical analysis model consisting of 3 points. Like any Forex pattern, the 123 figure can be bullish or bearish. In the first case, it is built according to the following rules:

• The first point at the bottom of a bearish trend;
• The second is the maximum of the retracement wave;
• The third is the completion of the rollback. It should not be below the entry level.

Bearish pattern:

• Point 1 at the maximum of the uptrend;
• 2 – minimum rollback;
• 3 – completion of the rollback, but the second high should be lower than the first.

If the pattern meets the conditions, you can trade for a rebound from the third level. We calculate the take profit price based on the range between 1 and 2. If there are 50 points between them, then the take should be set at a distance of 50 points from point 3.

Diamond

Forex pattern Diamond is also called a rhombus or a diamond. Absorption and pennants appear on the chart several times less frequently, but they provide reliable signals.

To make it easier to identify this reversal pattern on a chart, divide it into 2 parts: a diverging and a converging triangle.

This strong reversal pattern usually forms at the peak of a bullish trend or the low of a bearish trend.

When searching for a figure, you don’t need to wait for the perfect diamond to form. It may look something like this.

Trading is conducted according to three basic rules.

1. The transaction is opened after breaking through the diamond border and fixing the price at the level.
2. Stop loss at the last low or high of the pattern, depending on the direction of the trade.
3. Take profit = number of points from the minimum to the maximum of the Diamond.
4. Transactions are not opened inside the diamond.

The numbers in the screenshot mark all the main points. 4 – take profit, to which the quotes reached without any problems.

The Dragon

The dragon pattern is a complex reversal pattern that is formed from 5 points on the chart:

1. Head
2. Left leg
3. Right leg
4. Tail.

The Ordinary Dragon begins to build on a downward trend. The head is the last local maximum. Then the price falls to the bottom, forming a left leg. A bounce of no more than 50% from the Head–Left leg line forms a hump. After it, the price falls again, but does not break through the already formed bottom. It was the left leg that appeared.

Why should the right leg be higher than the left? This situation will prove that the bears have no strength left to update the minimums. This means that the price should soon reverse.

To determine the entry point, draw a trend line connecting the head and hump. As soon as the price breaks the support/resistance level, enter.

2 take profits are set. The first one is on the hump line. The second one is on the head. Stop loss at the Dragon low.

Harmonic patterns

Traders continue to debate the effectiveness of these models. Some consider them to be the best graphical analysis tool. Others believe that they are unreasonably difficult to use and are no better than standard patterns, like those we discussed above.

Harold Hartley was the first to invent and apply harmonic patterns in his work. To better understand the rules and features of these models, we recommend reading Hartley’s book “Profits in the Stock Market.”

Gartley patterns are identified on the chart along with Fibonacci levels. A mesh must be applied to each segment of the model. Because of this, Gartley instruments are not popular with many beginners.

From the editors. Before talking about harmonic models, we tested them. The complexity is justified. Therefore, we advise you to learn how to work with at least three models: ABCD, Basic, Babaochka.

ABCD

The reversal model is built using 4 points: A, B, C, D. On the chart they are combined by three segments:

• AB – start of trend
• BC – rollback
• CD is a slight continuation of the trend movement.

After point D is formed, we open a trade for a rebound to level A, but provided that the model complies with the construction rules.

1. Point C is located in the 38.2–61.8% Fibo corridor from the AB line.
2. D in the region of 127.2–161.8% of the BC line.

We set take profit in the range of 38.2–61.8% of the AD range.

Example.

The points are marked with numbers from 1 to 4. Point C closed as expected, not reaching 61.8% of the AB line at the Fibo line.

The grid on the BC segment and in the Fibonacci indicator settings add a level of 127.2%. Point D closed at a new level, but did not reach the 161.8 mark.

Now we drag the grid along line AB and determine the moment of closing the transaction.

The order worked.

Basic

These are 5 points where:

• X – start of trend
• A – start of rollback
• B – end of rollback
• C – slight resumption of trend movement
• D is the point from which the rebound occurs.

The main harmonic Gartley pattern is a continuation figure, that is, it indicates that after a correction, the trend will resume.

Construction rules:

• AB = 38.2–61.8% of CA
• CD = 127.2–161.8% of BC
• A–D = 61.8–78.6% of CA.

We trade from point D. Take profit is 38.2–61.8% of the AD range.

Butterfly

5 points with the same names as the main model, only there are differences in construction.

• AB = 38.2–78.6% of CA
• CD = 127.2–161.8% of BC
• A–D = 127.2–161.8% of CA.
• BC = 38.2–88.6% of AB.

Fractal patterns

They were developed by Bill Williams. The legendary stock expert suggested that there are no random changes in the market. The chart shows fractal movement and this should be used to make money in the financial markets.

A fractal is a point on the chart, after reaching which the price reverses.

On a chart, a fractal is a minimum of 5 candles, where the average is the main one. Fractal up – the maximum of the main candle is higher than the others. Fractal down – the minimum of the average candle is lower than the others.

The rules for constructing fractal patterns are simple. But without the Fractals indicator, developed by Bill Williams, it is not so easy to find them on the chart, you can get confused. This tool is installed by default in MetaTrader terminals.

Fractals have potentially significant lows and highs. But this does not mean that after its appearance the price will necessarily go in the right direction. It all depends on the specific market situation: the current trend and its strength. You also need to look at the fractals themselves, which can be of several types.

1. Reference – rising from 5 candles
2. Double-sided – a fractal candle with both the lowest low and the highest high. Not a signal.
3. With common bars for calculation. The first meaning is stronger.
4. Non-classical with 6 candles. It is formed in a flat, but confirms the presence of a trend.

There are also true and false fractals. True – the right minimum or maximum did not break through the left one.

Use fractals as additional sources of information and look for confirmation of signals. Then it will give results.

Using patterns in Forex requires skill and experience. You can find a doji on a chart at a glance, but building a rhombus or visually drawing a dragon is more difficult. This is fine. If you don't succeed the first time, practice again. Don't forget, to become a professional in any field, you need to spend 10,000 hours on it.

Good afternoon, fellow Forex traders!

Today we will look at the software package Pattern Graphix from broker InstaForex. The program automatically detects technical analysis patterns on the chart, promptly notifying you of the formation of new signals. We have previously considered a similar solution from other developers - Autochartist . Pattern Graphix provides similar functionality and can be a good alternative in simplifying routine graphical analysis processes. In this review, we will compare both programs and choose the winner.

Program features

Pattern Graphix is ​​an application for MetaTrader 4 that allows you to identify the most common graphical patterns and candlestick patterns on a chart in real time, relieving the trader of constant market monitoring. The program provides all the necessary settings to create a comfortable environment, in particular, setting colors and notification methods.

The task of the auxiliary advisor is to timely identify trading patterns on the chart and generate ready-made entry signals. That is, the main task of the advisor is to assist in daily trading. When a new signal appears, an alert is sent indicating the type and description of the detected pattern, which helps you to be aware of the current state of the market.

Also, it is worth noting the possibility of identifying a large number of candlestick patterns. This saves the trader from the “human factor”, since it is very easy to miss one of the many candlestick formations. Actually, this function can be used to confirm signals based on a trading strategy, or trade directly using patterns detected on the chart.

Installation

Go to the InstaForex website in the section “Traders” - “Forex Analytics” - “Pattern Graphix”.

Below there will be a link to download the program.

Run the installation file and select your preferred language.

At the next step, you need to specify the data directory of the InstaForex terminal. You can get it through “File” - “Open data directory”.

Specify the desired directory and click “Next”.

Restart your terminal. The “Pattern_Graphix” advisor will appear in the navigator window. To launch, simply drag the advisor onto any chart of interest.

Don't forget to allow the use of DLLs, without this the program will not work.

If everything is done correctly, a settings window will appear on the chart.

This product is exclusive to InstaForex and does not work on accounts of other brokers. If you do not have a real account with the company, you can test the program on any InstaForex demo account.

Graphic patterns

To enable the display of certain patterns, just check the appropriate boxes in the settings window. Pattern Graphix supports several types of graphic patterns. This is ftrend continuation patterns: Triangle, Pennant, Rectangle, Flag.

Reversal Patterns: Head and Shoulders, Double Top/Double Bottom, Triple Top/Triple Bottom.

Lines and levels: Support and resistance lines, Fibo levels, Trend channel.

And an extensive list of candlestick patterns: Hammer, Hangman, Absorption, Harami, Harami Cross, Piercing Candle, Dark Clouds, Doji Star, Morning and Evening Star, Morning and Evening Doji Star, Homing Pigeon, Three Stars, Meeting Candles, Belt Grab, Three white soldiers, Repelled attack, Reflection, Three black crows, Three identical crows, Breakdown, Three days from the inside up/down, Three outside days up/down, Three stars in the south, Hiding swallow, Sticky sandwich, Stepped bottom, Match on the bottom level.

Setting up notifications

In the “Notification Settings” tab, you can select the type of notifications: display a pop-up window directly in the terminal, PUSH notifications to your smartphone, and notifications by email.

When a new signal appears, an alert window appears with a detailed description of the signal. The alert is displayed on top of all windows, so you won't miss the signal even if the terminal has been minimized. Right from here you can open a chart with the resulting pattern.

At the same time, information about the signal is displayed on the chart itself. You can change the color of the indication at your discretion. To configure the information text, go to the “Notification settings” - “Customize display on chart” menu. Here you can select the color for the main text and the color of the trading signals.

You can select a color separately for each shape. To do this, click “Customize...” next to the pattern name.

Comparison with Autochartist

Unlike Autochartist, Pattern Graphix provides much less extensive options. On the other hand, if you only need to identify patterns and nothing more, then the program will perform its functions perfectly. A comparison table will give a clearer idea of ​​the main differences between the two programs.

Here you need to take into account that most of the Autochartist functionality is located in the web client, when all the features of Pattern Graphix are available directly from MetaTrader4. The implementation of alerts in Pattern Graphix is ​​more thoughtful; the message appears on top of all windows, plus there is the ability to send PUSH notifications. This allows you to instantly react to the signal that appears by following a quick link directly to the MT4 chart.

The autochartist has a separate column with statistics of already completed patterns, which allows you to quickly analyze the quality of working out individual patterns. The InstaForex application only allows for backtesting, so all the necessary statistics will have to be collected manually. The operation of the program can be checked in the MT4 visual tester. For convenience, a button to start/stop testing has been added to the left side of the graph.

When a pattern is detected, testing stops automatically, so you won't miss a signal even if the tester was running in the background.

Just like Autochartist, the program is capable of identifying complex signals. For example, in this case we have a triple top pattern and a downward trend channel, together forming a strong bearish signal. At the same time, recommended stop loss and take profit levels are displayed.

The only drawback is that at this stage, the program does not detect breakouts of trend levels, but only signals their presence. Actually, for this reason, signals appear almost instantly: candle formations are determined after the formation of a candle, a trend channel is formed after the formation of three extreme points. Apparently, traditional Bill Williams is used in the calculation. Therefore, it is better to wait for additional confirmation before entering a trade.

Conclusion

For many, Pattern Graphix will not be an alternative to an already well-known product. Nevertheless, the functionality provided provides the very basis on which you can already conduct full-fledged trading. For beginners, the product is extremely useful. The main thing is not to try to follow the signals blindly, but to have your own understanding of the market situation.

Best regards, Alexey Vergunov

Graphical market analysis using Price Action figures is popular with a significant number of traders. Over its almost century-long history, this type of analysis has proven that there is no need for complex calculations in order to predict price movements. It is enough to gain experience in identifying price patterns on charts and strictly follow the rules for entering and exiting the market based on their signals. analyzed visually to identify patterns of price movement. If in the past some candlestick combination worked successfully, then we can assume that it will work the same way again. After all, the price, one way or another, is moved by people who try to adhere to generally accepted rules, as a result of which Price Action candlestick patterns are formed.

According to historical data, the first person to identify a pattern in the behavior of quotes was Charles Dow. This man, who later became the author of the Dow stock index, named after him, formulated the main points of generating signals for concluding transactions with minimal risks only on the basis. Subsequently, based on the observations of other traders, some Forex graphic patterns were identified, which periodically formed at certain moments and were followed by a certain phenomenon - either a reversal or a continuation of the price movement in the same direction.

In the 30s of the 20th century there was a leap in the development of stock graphics. The work of famous market traders was published, and in the book Technical Analysis of Stock Trends, authored by Edwards and Magee, the main patterns were described as they are known to ordinary traders today. And although it is indicator-free, indicators may still be present in it. But they are used to search for candlestick patterns, which the trader analyzes - and based on his analysis, he makes a decision on further trading.

Basics of visual analysis.

Speaking about Forex graphic figures, we are talking about a set of candles that form a certain visual formation, which, although it does not give a 100% signal to enter the market in one direction or another, it is quite possible to use it to predict the direction of price movement. Why can they be used to predict future price movements? This happens because the formation of such structures was preceded by market phenomena: this is both the human factor. All of them influence the dynamics of the market, which is constantly trying to reach equilibrium. And if previously the market came to its equilibrium when such phenomena appeared, then with a high degree of probability we can assume that this will happen again and again. Each model arises for certain reasons, and for each model recommendations have been developed for its search, precise definition and actions that should be taken. In addition to helping to predict movement, some Price Action price models can help determine the levels that the price should reach and at which it should.

Trading based on Forex graphical analysis will only be effective if the trader gains enough practical experience in recognizing patterns and interpreting them. To trade competently using price models, you should adhere to several rules:

• - use tools with where the figure has the opportunity to express itself;
• - avoid trading during;
• - do not try to look for figures that exactly match those depicted in examples, in books, in articles. There are general rules for their construction, but there are no exact measurements;
• - it is necessary to learn to distinguish between general trends in the market, giving and exiting. There will be a strong movement in the market only when a large number of trading participants recognize the formation on the chart and, depending on its type, direct the market in the appropriate direction. And the sooner you can recognize the figure, the sooner you can enter the market;
• - it is better to build models on medium and long time periods (from H1), where market noise will not be misleading;
• - indicator-free trading based on Price Action patterns - this is trading in the medium and long term, where transactions are kept open for at least several hours. It is not suitable for scalpers;
• - if the same figure is observed simultaneously on several time periods, then this strengthens the signal;
• - the search for a figure and the search for targets must be carried out over the same time period;
• - when approaching, the figure may not be able to withstand it and break, that is, it will not work further. Therefore, in such places you should carefully monitor the price.

Basic candlestick patterns on Forex charts.

Forex graphic figures are conventionally divided into two types:

• - continuation figures. After them, the trend will continue to move prior to the appearance of the pattern, which represents a market pause. The list of trend continuation figures includes, varieties of which are, Zigzag, Rectangle and others. Graphically, the development of trend continuation models looks like this:

  Rice. 1. Graphic representation of trend continuation patterns.

• - to models trend continuation One can also include such a phenomenon on the graph as:

  
  

  Rice. 2. GAP as a trend continuation figure.

• - trend reversal patterns. After their appearance, with a high degree of probability, a change in the direction of price movement should be expected. For a trend change to occur, a large number of participants must appear on the market willing to make transactions in the opposite direction. Therefore, trend reversal patterns will take longer to form compared to previous ones. And in terms of the number of combinations, they surpass trend continuation models. Among the most common are Butterfly, Bowl, Diamond and others. Graphically, their development can be represented as follows (click to enlarge):
• - in a separate group of graphical analysis figures, you can display various types that work as both continuation and trend reversal figures:

  
  

  Rice. 4. Options for practicing the Triangle figure.

As for the rules for constructing models, here the opinions of experts differ: the main part is of the opinion that it is better to build them based on closing prices, the other part builds models based on the maximum and minimum values ​​of candles, and you can also do this using weighted average values.

In their classical description, models are rarely seen on charts. More often, the price draws figures that are part of larger formations, or that require confirmation by other tools, the same indicators or. You should analyze the chart as carefully as possible and evaluate the correctness of the formations. You should be careful with triangles, which, depending on the waves they contain, can give signals both to continue the movement and to reverse it (for convenience, the image can be enlarged):

General points of working with graphic models.

As practice shows, the likelihood that Forex will be worked out increases when it is recognized by a large number of trading participants. This happens 30-50% of the total trading time. If the market opinion is unstable, as well as during a flat period, the appearance of models is random, and they will not be worked out according to the rules. The analysis should always be accompanied by a fundamental background to avoid misidentification of formations in inappropriate periods. You should evaluate and take action only after you are convinced that the figure has formed. You can’t mentally complete it. You should enter the market when a key level has been broken through and the price is confidently moving in the predicted direction:

Rice. 6. An example of working out the Head and Shoulders graphic model.

Conclusion.

If you decide to trade based on graphical analysis and Price Action patterns, then remember that you will not receive a 100% guarantee that all your trades will be successful. After all, there is no complete confidence that the figure will be correctly recognized, since each participant sees the market in his own way, and everyone’s visual imagination is different.

To simplify the search for patterns, you can use indicators to identify Price Action candlestick patterns. These, first of all, include the indicator; in addition, you can use it.

Taking into account the fact that the probability of incorrect interpretation of formations is quite high, entering the market based on the analysis performed should be carried out with strict adherence to. If you take into account all the nuances of graphical analysis described above, you can achieve good results and reach a decent level of earnings not only on the Forex currency market, but also on any financial markets!

Why and how were Forex patterns invented? In this article we consider the most popular patterns of modern trading in the foreign exchange market. How, based on the patterns and statistics of the movement of the currency chart of previous years, can you make money on Forex with minimal risks?

Trading according to templates and patterns is the key to stability!

Technical analysis in the foreign exchange market is based on the theory that market history and the movement of currency charts are constantly repeated, which means the repetition of similar events that have already occurred in the past. A pattern is a graphical drawing that makes it possible to predict the future movement of a quote. In this article we will analyze the most popular Forex templates.

All templates can be divided into 2 main groups:

• U-turns.
• Continuations.

Judging by the names, the first patterns predict a radical reversal of the trend, while the second group foretells its continuation.

What templates are used most often?

A reversal foreshadows a turning point in the movement of a trend and its subsequent dramatic reversal. The continuation pattern, in turn, simply foreshadows a pause and subsequent movement of the trend in the same direction. The great advantage of this figure is the ability to analyze the potential of quote movement and the ability to close an order at breakeven when the order will not be processed.

• Trend reversal patterns
• Head and Shoulders and Quasimodo

– a reversal figure that justifies the moment when upward trends no longer show new highs and move to lows, changing the direction of the current trend.

"Head and Shoulders" has branches, which include "Quasimodo". It has distorted “shoulders”, however, in some situations it is more effective than its “smooth” and beautiful brother.

Shark

“Shark”, also called “Shark pattern”, is one of the harmonious patterns. It is determined using Fibonacci indicators, and supporters of this trading strategy consider these levels to be very important. A shark is similar to a “double bottom/top”, but has its own specific features.

The Dragon

The Dragon pattern is a rare phenomenon that is an improved Double Bottom pattern. And the reverse dragon, on the contrary, is similar to the signals of the Double Top pattern and symbolizes a change in the radical reversal of the uptrend. Here only Fibonacci levels have been added for the correct interpretation of the model and the moment of entering the market has been improved. Because of this, it gives much more advantages to the trader and entry into the market has become with smaller stops. It signals a change in trend from a downtrend to an uptrend.

Double top

“Double Top” is a reversal pattern that is formed after double testing the resistance line and breaking the support level. A double top looks like the letter M. This pattern is often found in the market, and breaking through support is considered a sign of the need to enter the market with an order to sell the currency.

Double bottom

A Double Bottom pattern occurs when the value of a currency fails to overcome support and subsequently breaks through a resistance level. To place a bet, we select the distance from the resistance level to the support level and set it aside from the point of breaking the upward line.

Triple Top

“Triple Top” refers to the Head and Shoulders pattern, but while in “Head and Shoulders” the middle of the chart is located above other highs, in this situation all highs are located at the same level. After the support line is overcome, the trader can enter the market with a transaction to sell the currency. Note that a triple top is not observed often.

1:1

Model 1:1 - it is based on the theory of market symmetry, when value moves in the same rhythm and is likely to repeat itself again.

Butterfly

Butterfly is one of the most common patterns at the moment. It is very similar to the Crab and requires strict adherence to Fibonacci retracement levels. The most important thing with this pattern is to form point B, which must be at the correction level of 0.786 from the XA movement.

Diamond

Diamond is a rare pattern in Forex, the structure of which is very similar to the cut of a diamond, which is why it got its name. This is a reversal pattern formed at trend peaks, although trend breakouts also happen.

Note that the Diamond appears when the price does not know where to move, forming 2 connected triangles on the chart: an expanding and a symmetrical one, which are the boundaries of this figure. It is impossible to trade inside a diamond, which means that a trader must act during breakdowns of the Diamond’s borders.

Symmetrical triangle

Symmetrical has the specificity of being able to break through in both directions. This means that it can be considered a signal both for the continuation of the trend and for its reversal. The symmetrical triangle will only be completed if the value breaks through one of the sides of our figure. For a trader, a high-quality signal will be the moment when the value of the currency has not yet reached one of the sides, but has sharply shifted in the opposite direction.

Trend continuation patterns: ascending triangle

Rising ones characterize growing trends and indicate the predominance of currency buyers over sellers and their greater financial power. After the resistance line is broken, the trend begins a rapid upward movement. Many traders collect orders at the very beginning of the appearance of an ascending triangle.

Descending triangle

Descending is characterized by a lower boundary that acts as support for the exchange rate, and an upper boundary that looks downward. This graph indicates a downward trend and the predominance of sellers over buyers in the market. After breaking through the lower line, the chart shows a rapid falling movement.

Flag

– is formed only during powerful trends. Such patterns are formed on charts only in the moments before a future rapid surge in the exchange rate. If a Flag appears on the chart, then a sell order is opened to overcome the lower boundaries if the trend is downward, or the upper ones if it is upward. As take-profit, we set the value to the distance of the “flagpole”, laid down from the place where the line was broken.

Pennant

A pennant is very similar to a symmetrical triangle, but it forms much faster on charts, and trend lines based on highs and lows converge sharply towards each other. The pennant is always a trend continuation figure, so traders should open orders only in this direction!

5-0

Model 5-0 – has a unique structure, determined by Fibonacci levels, or visually. Harmonic patterns, including the 5-0 pattern, state that the most important level is the 50% retracement zone of the quote movement and determining the pattern on small time frames and timely entry into the trade.

Candlestick patterns

There are also candlestick patterns that are popular among traders. They imply patterns on Japanese charts. The use of a Japanese candle is associated with high information content and ease of use of the tool. The most popular patterns are: hammer, bullish engulfing, 3 stars, bearish engulfing, evening star and others.

The emergence of pattern trading in Forex

To begin with, it should be noted that patterns are the basis of technical analysis in the foreign exchange market. In other words, when it comes to the past movement of the chart, its analysis to determine the future trend and make hypotheses, we turn to patterns.

The hypothesis put forward is based on observations of the graph and statistics of the movement of currency quotes in the past. For example, you notice a pattern on the chart, but you still cannot formulate it, then you need to initially create a drawing that will predict the most likely behavior of the currency chart.

This is how the triangle figure was found. Initially, traders noticed that before sharp jumps in the quote, the chart narrows significantly, forming the above-mentioned geometric figure from the extremes. After conducting observations and statistics, the triangle was recorded in collection books and tables of graphic patterns on Forex.

This is how other patterns were discovered, which today are ready-made tools for choosing the ideal moment for a profitable entry into the market. All patterns known to date have been tested more than one thousand times by traders around the world, so they are quite safe and profitable in trading.

As soon as a situation similar to one of the patterns (Forex patterns) appears on the charts, the trader draws a figure using the platform tools. If the chart fully corresponds to it, then the trader can safely enter the market by opening a deal. At the same time, graphical models are effective on any time frame, which makes their use in trading much easier.