Chart Patterns, Magnitude, Price Targets And Expiry

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Форекс индикатор паттернов PricePatterns: фигуры ТА на ценовом графике

Форекс индикатор паттернов PricePatterns отображает на графике самые распространенные фигуры технического анализа валютного рынка Форекс.

Форекс индикатор паттернов PricePatterns, как это понятно из названия, предназначен для поиска и идентификации фигур технического анализа на графике валютной пары.

Индикатор PricePatterns позволяет находить самые распространенные ценовые паттерны:

  • Голова и плечи
  • Перевернутая голова и плечи
  • Двойная/тройная вершина
  • Двойное/тройное дно
  • Треугольник
  • Сходящийся и расходящийся клин

Форекс индикатор паттернов PricePatterns

Форекс индикатор паттернов PricePatterns обладает целой системой оповещений об обнаружении паттерна, а также позволяет настроить отображение только нужных фигур технического анализа.

Мы рекомендуем использовать форекс индикатор паттернов PricePatterns на таймфреймах от Н4 и старше, а также напоминаем, что технический индикатор является всего лишь помощником трейдера в принятии торгового решения, поэтому слепо ориентироваться на найденные фигуры ТА не стоит.

Candlestick Patterns

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Name Timeframe Reliability Pattern Candle #
Emerging Patterns
S&P 500 1H Doji Star Bearish Current
EUR/USD 30 Three White Soldiers Current
S&P 500 15 Bullish Engulfing Current
Dow 30 15 Bullish Engulfing Current
Completed Patterns
Crude Oil WTI 1M Three Black Crows 1
Crude Oil WTI 1W Bullish Engulfing 1
EUR/USD 1H Three Outside Down 1
S&P 500 30 Deliberation Bearish 1
S&P 500 30 Doji Star Bearish 1
Natural Gas 15 Downside Gap Three Methods 1
Natural Gas 15 Bullish Engulfing 1
S&P 500 15 Engulfing Bearish 1
EUR/USD 1M Bullish Hammer 2
Dow 30 1W Bullish Engulfing 2
S&P 500 1W Bullish Engulfing 2
USD/JPY 1W Falling Three Methods 2
USD/JPY 1W Engulfing Bearish 2
EUR/USD 1D Bullish Engulfing 2
S&P 500 5H Three Black Crows 2
Crude Oil WTI 5H Evening Star 2
Crude Oil WTI 5H Engulfing Bearish 2
EUR/USD 1H Engulfing Bearish 2
S&P 500 1H Engulfing Bearish 2
USD/JPY 1H Bullish Hammer 2
GBP/USD 30 Harami Bullish 2
Crude Oil WTI 1M Engulfing Bearish 3
Natural Gas 1M Three Black Crows 3
USD/JPY 1W Three Outside Up 3
Gold 1W Three Outside Down 3
Natural Gas 1D Three Outside Up 3
GBP/USD 1D Three Outside Down 3
Crude Oil WTI 1D Harami Bearish 3
Crude Oil WTI 1D Harami Cross Bearish 3
Dow 30 5H Three Black Crows 3
Crude Oil WTI 5H Doji Star Bearish 3
S&P 500 1H Advance Block Bearish 3
DAX 1H Three Outside Down 3
Dow 30 1H Engulfing Bearish 3
Natural Gas 1H Three Black Crows 3
GBP/USD 30 Engulfing Bearish 3
EUR/USD 30 Three Black Crows 3
No Patterns were recognized.

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Introduction to Technical Analysis Price Patterns

In technical analysis, transitions between rising and falling trends are often signaled by price patterns. By definition, a price pattern is a recognizable configuration of price movement that is identified using a series of trendlines and/or curves. When a price pattern signals a change in trend direction, it is known as a reversal pattern; a continuation pattern occurs when the trend continues in its existing direction following a brief pause. Technical analysts have long used price patterns to examine current movements and forecast future market movements.

Key Takeaways

  • Patterns are the distinctive formations created by the movements of security prices on a chart and are the foundation of technical analysis.
  • A pattern is identified by a line that connects common price points, such as closing prices or highs or lows, during a specific period of time.
  • Technical analysts and chartists seek to identify patterns as a way to anticipate the future direction of a security’s price.
  • These patterns can be as simple as trendlines and as complex as double head-and-shoulders formations.

Trendlines in Technical Analysis

Since price patterns are identified using a series of lines and/or curves, it is helpful to understand trendlines and know how to draw them. Trendlines help technical analysts spot areas of support and resistance on a price chart. Trendlines are straight lines drawn on a chart by connecting a series of descending peaks (highs) or ascending troughs (lows). A trendline that is angled up, or an up trendline, occurs where prices are experiencing higher highs and higher lows. The up trendline is drawn by connecting the ascending lows. Conversely, a trendline that is angled down, called a down trendline, occurs where prices are experiencing lower highs and lower lows.

Trendlines will vary in appearance depending on what part of the price bar is used to “connect the dots.” While there are different schools of thought regarding which part of the price bar should be used, the body of the candle bar—and not the thin wicks above and below the candle body—often represents where the majority of price action has occurred and therefore may provide a more accurate point on which to draw the trendline, especially on intraday charts where “outliers” (data points that fall well outside the “normal” range) may exist. On daily charts, chartists often use closing prices, rather than highs or lows, to draw trendlines since the closing prices represent the traders and investors willing to hold a position overnight or over a weekend or market holiday. Trendlines with three or more points are generally more valid than those based on only two points.

  • Uptrends occur where prices are making higher highs and higher lows. Up trendlines connect at least two of the lows and show support levels below price.
  • Downtrends occur where prices are making lower highs and lower lows. Down trendlines connect at least two of the highs and indicate resistance levels above the price.
  • Consolidation, or a sideways market, occurs where price is oscillating between an upper and lower range, between two parallel and often horizontal trendlines.

Continuation Patterns

A price pattern that denotes a temporary interruption of an existing trend is known as a continuation pattern. A continuation pattern can be thought of as a pause during a prevailing trend—a time during which the bulls catch their breath during an uptrend, or when the bears relax for a moment during a downtrend. While a price pattern is forming, there is no way to tell if the trend will continue or reverse. As such, careful attention must be placed on the trendlines used to draw the price pattern and whether price breaks above or below the continuation zone.   Technical analysts typically recommend assuming a trend will continue until it is confirmed that it has reversed. In general, the longer the price pattern takes to develop, and the larger the price movement within the pattern, the more significant the move once price breaks above or below the area of continuation.

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If price continues on its trend, the price pattern is known as a continuation pattern. Common continuation patterns include:

  • Pennants, constructed using two converging trendlines
  • Flags, drawn with two parallel trendlines
  • Wedges, constructed with two converging trendlines, where both are angled either up or down

Pennants

Pennants are drawn with two trendlines that eventually converge. A key characteristic of pennants is that the trendlines move in two directions—that is, one will be a down trendline and the other an up trendline. Figure 1 shows an example of a pennant. Often, volume will decrease during the formation of the pennant, followed by an increase when price eventually breaks out.

Flags

Flags are constructed using two parallel trendlines that can slope up, down or sideways (horizontal). In general, a flag that has an upward slope appears as a pause in a down trending market; a flag with a downward bias shows a break during an up trending market. Typically, the formation of the flag is accompanied by a period of declining volume, which recovers as price breaks out of the flag formation.

Wedges

Wedges are similar to pennants in that they are drawn using two converging trendlines; however, a wedge is characterized by the fact that both trendlines are moving in the same direction, either up or down. A wedge that is angled down represents a pause during a uptrend; a wedge that is angled up shows a temporary interruption during a falling market. As with pennants and flags, volume typically tapers off during the formation of the pattern, only to increase once price breaks above or below the wedge pattern.

Triangles

Triangles are among the most popular chart patterns used in technical analysis since they occur frequently compared to other patterns. The three most common types of triangles are symmetrical triangles, ascending triangles, and descending triangles. These chart patterns can last anywhere from a couple weeks to several months.

Symmetrical triangles occur when two trend lines converge toward each other and signal only that a breakout is likely to occur—not the direction. Ascending triangles are characterized by a flat upper trend line and a rising lower trend line and suggest a breakout higher is likely, while descending triangles have a flat lower trend line and a descending upper trend line that suggests a breakdown is likely to occur. The magnitude of the breakouts or breakdowns is typically the same as the height of the left vertical side of the triangle, as shown in the figure below.

Cup and Handles

The cup and handle is a bullish continuation pattern where an upward trend has paused, but will continue when the pattern is confirmed. The “cup” portion of the pattern should be a “U” shape that resembles the rounding of a bowl rather than a “V” shape with equal highs on both sides of the cup. The “handle” forms on the right side of the cup in the form of a short pullback that resembles a flag or pennant chart pattern. Once the handle is complete, the stock may breakout to new highs and resume its trend higher. A cup and handle is depicted in the figure below.

Reversal Patterns

A price pattern that signals a change in the prevailing trend is known as a reversal pattern. These patterns signify periods where either the bulls or the bears have run out of steam. The established trend will pause and then head in a new direction as new energy emerges from the other side (bull or bear). For example, an uptrend supported by enthusiasm from the bulls can pause, signifying even pressure from both the bulls and bears, then eventually giving way to the bears. This results in a change in trend to the downside. Reversals that occur at market tops are known as distribution patterns, where the trading instrument becomes more enthusiastically sold than bought. Conversely, reversals that occur at market bottoms are known as accumulation patterns, where the trading instrument becomes more actively bought than sold. As with continuation patterns, the longer the pattern takes to develop and the larger the price movement within the pattern, the larger the expected move once price breaks out.

When price reverses after a pause, the price pattern is known as a reversal pattern. Examples of common reversal patterns include:

  • Head and Shoulders, signaling two smaller price movements surrounding one larger movement
  • Double Tops, representing a short-term swing high, followed by a subsequent failed attempt to break above the same resistance level
  • Double Bottoms, showing a short-term swing low, followed by another failed attempt to break below the same support level

Head and Shoulders

Head and shoulders patterns can appear at market tops or bottoms as a series of three pushes: an initial peak or trough, followed by a second and larger one and then a third push that mimics the first. An uptrend that is interrupted by a head and shoulders top pattern may experience a trend reversal, resulting in a downtrend. Conversely, a downtrend that results in a head and shoulders bottom (or an inverse head and shoulders) will likely experience a trend reversal to the upside. Horizontal or slightly sloped trendlines can be drawn connecting the peaks and troughs that appear between the head and shoulders, as shown in the figure below. Volume may decline as the pattern develops and spring back once price breaks above (in the case of a head and shoulders bottom) or below (in the case of a head and shoulders top) the trendline.

Double Top

Double tops and bottoms signal areas where the market has made two unsuccessful attempts to break through a support or resistance level. In the case of a double top, which often looks like the letter M, an initial push up to a resistance level is followed by a second failed attempt, resulting in a trend reversal. A double bottom, on the other hand, looks like the letter W and occurs when price tries to push through a support level, is denied, and makes a second unsuccessful attempt to breach the support level. This often results in a trend reversal, as shown in the figure below.

Triple tops and bottoms are reversal patterns that aren’t as prevalent as head and shoulders or double tops or double bottoms. But, they act in a similar fashion and can be a powerful trading signal for a trend reversal. The patterns are formed when a price tests the same support or resistance level three times and is unable to break through.

Gaps occur when there is empty space between two trading periods that’s caused by a significant increase or decrease in price. For example, a stock might close at $5.00 and open at $7.00 after positive earnings or other news. There are three main types of gaps: Breakaway gaps, runaway gaps, and exhaustion gaps. Breakaway gaps form at the start of a trend, runaway gaps form during the middle of a trend, and exhaustion gaps for near the end of the trend.

The Bottom Line

Price patterns are often found when price “takes a break,” signifying areas of consolidation that can result in a continuation or reversal of the prevailing trend. Trendlines are important in identifying these price patterns that can appear in formations such as flags, pennants and double tops. Volume plays a role in these patterns, often declining during the pattern’s formation, and increasing as price breaks out of the pattern. Technical analysts look for price patterns to forecast future price behavior, including trend continuations and reversals.

Trading chart pattern recognition

Trading chart patterns guide

Chart patterns are an important tool which should be utilised as part of your technical analysis. From beginners to professionals, chart patterns play an integral part when looking for market trends and predicting movements. They can be used to analyse all markets including forex, shares, commodities and more.

Chart patterns often form shapes, which can help predetermine price breakouts and reversals. Recognising chart patterns will help you gain a competitive advantage in the market, and using them will increase the value of your future technical analyses. Before starting your chart pattern analysis, it is important to familiarise yourself with the different types of trading charts.

While the idea of pattern recognition may seem strange, it’s based on carefully tested methods which underline their usefulness to traders. Importantly, patterns are factors to consider when calculating where to enter, set stop-loss orders, and where to set your profit targets. These factors are, of course, some of the key things that all traders will wish to consider when managing their overall portfolio.

  • Recognise how price movements can develop into price patterns
  • Isolate sensible entry points
  • Manage risk with stop losses and set profit targets

Types of trading charts

Our Next Generation platform has several chart types on offer including the popular line, bar (OHLC) and candlestick charts. The best chart for you depends on how you like your information displayed and your trading level. You can find out more from our video on different chart types and their best uses.

Line chart

Line charts are the simplest type of charts in financial markets. There is no high or low point specified, unlike bar and candlestick charts, and they are instead based on lines drawn directly between closing prices. This chart type is commonly utilised in reports and presentations to show general price movements, however they often lack granular information when compared to other trading chart options.

OHLC (American Bar) chart

Bar charts or OHLC charts (open high low close chart), unlike line charts show both the opening and closing price, as well as the highs and lows for the specified period. As opposed to a line, the data is more in depth and uses a single vertical bar. The top of the bar represents the highest price achieved for the specified time frame and the bottom of the bar the lowest price. Additionally, a horizontal bar extends to the left of the bar which denotes the opening price and a short horizontal bar to the right which signifies the closing price. The direction of a trade can be seen from the colour of the bar. A green bar indicates that the closing price was higher than the open, however red indicates that the opening price was higher than the close.

Candlestick chart

Candlestick charts are very similar to bar charts but are more popular with traders. Like bar charts the candlestick’s highest wick is the highest price in that period and the lowest wick is the lowest price. The candlestick body represents the difference between the opening and closing price, which can help to indicate price movements. The candlestick is green or red subject to a bullish or bearish movement respectively. A bullish movement is an uptrend, whilst a bearish movement shows a downtrend. Find out how to read the bear and bull markets effectively here.

Many chart patterns can be represented best on candlestick charts, as candlestick charts have their own set of chart patterns alongside the ones outlined in this article. For in-depth analysis on candlestick charts and their specific patterns, see our introduction to candlestick charts and our candlestick charts pattern guide.

12 most important stock chart patterns

The following chart patterns are the most recognisable and common trading patterns to look out for when using technical analysis to trade shares, forex and other markets. Following our guide of the 11 most important stock chart patterns that can be applied to most financial markets could be a good way to start your technical analysis.

Ascending triangle

The ascending triangle is a bullish ‘continuation’ pattern that signifies a breakout is likely where the triangle lines converge. To draw this pattern, you need to place a horizontal line (the resistance line) on the resistance points and draw an ascending line (the uptrend line) along the support points.

Descending triangle

Unlike ascending triangles, the descending triangle represents a bearish market downtrend. The support line is horizontal, and the resistance line is descending, signifying the possibility of a downward breakout.

Symmetrical triangle

For symmetrical triangles, two trend lines start to meet which signifies a breakout in either direction. The support line is drawn with an upward trend, and the resistance line is drawn with a downward trend. Even though the breakout can happen in either direction, it often follows the general trend of the market.

Pennant

Pennants are represented by two lines that meet at a set point. They are often formed after strong upward or downward moves where traders pause and the price consolidates, before the trend continues in the same direction.

Channels

Having looked at setups where the support and resistance levels are moving closer together, the channel setup shows where the two levels run parallel to one another. Although the pattern looks very different to any of the triangle family, the behaviours in terms of the setups are quite similar, in terms of the breakout and risk management.

The channel chart pattern can be shaped as a rectangle, where the support and resistance lines run parallel until there is a breakout. The breakout is usually the opposite direction of the trendlines, meaning this is a reversal pattern.

A flag is a shorter-term version of the channel, much like how the pennant is a shorter-form of a triangle. Flags require many of the same characteristics as the pennant in order to be confirmed as genuine.

Both the flag and the pennant occur after a sharp movement in price – this near-vertical price move forms the ‘flag pole’ on which the pennant or the flag occurs. It’s important to see this in the lead-up because the pattern is not genuine without it. Lastly, you are likely to see a spike in volume in both cases on the breakout, which will add to the confirmation of the pattern.

Wedge

A wedge represents a tightening price movement between the support and resistance lines, this can be either a rising wedge or a falling wedge. Unlike the triangle, the wedge doesn’t have a horizontal trend line and is characterised by either two upward trend lines or two downward trend lines.

For a downward wedge it is thought that the price will break through the resistance and for an upward wedge, the price is hypothesised to break through the support. This means the wedge is a reversal pattern as the breakout is opposite to the general trend.

Double top

The double top is a simple yet effective chart pattern that most commonly indicates that an upward trend may be losing momentum. It occurs when a stock hits a price level but meets resistance and falls back down from it (see highlighted area in chart). When the price moves back up but fails to break the previous high, it forms the influential double top pattern. The double top pattern is considered complete when the price falls back and breaks the previous low, indicating further weakness. The target being the ‘height’ of the pattern projected down from where it breaks that low.

Double bottom

The double bottom is the opposite of a double top and applies to a falling market. In a double bottom, the falling price hits a low point and then bounces back up. The price turns lower again but doesn’t break through that previous low. It’s when the price rallies and pushes through the previous high that the double bottom is completed. The target can then be perceived as the height of that double bottom, projected from that breakout point (see second arrow in accompanying chart).A double bottom looks similar to the letter W and indicates when the price has made two unsuccessful attempts at breaking through the support level. It is a reversal pattern as it highlights a trend reversal. After unsuccessfully breaking through the support twice, the market price shifts towards an uptrend.

Trendlines and break outs

Like the classic cliché ‘the trend is your friend’, chart followers look to identify a trend in a particular stock and jump on board with the intention of riding that move further. But of course trends don’t last forever and a trendline break can be another influential stock pattern. Trendlines are drawn underneath rising lows in an uptrend (indicating buying demand) and above falling highs in a downtrend (indicating selling pressure). A break in this level, as indicated by the blue circle in the accompanying chart, is an indication that a change of trend could be on the cards, often prompting traders and investors to adjust their positions accordingly.

Head and shoulders

The head and shoulders pattern is similar to a double top, but is made up of three highs (a peak, followed by a larger peak and then a small peak again, hence the name head and shoulders). Typically in a head and shoulders pattern, the second peak should be the largest, indicating the head, followed by a lower high in the third peak. The chartist will draw a smaller trendline under the recent lows, referred to as the ‘neckline’. It is when this trendline is broken and price moves lower that the head and shoulders pattern is said to be complete, and the target is for a move lower still – equal to the height of the ‘head’ in the pattern. Head and shoulders are reversal patterns that are used to indicate a possible change in sentiment from a bullish to a bearish market or vice versa.

Rounding bottom

A rounding bottom or cup usually indicates a bullish upward trend. Traders can buy at the middle of the U shape, capitalising on the bullish trend that follows as it breaks through the resistance levels.

Cup and handle

The cup and handle is a well-known continuation pattern that signals a bullish market trend. It is the same as the above rounding bottom, but features a handle after the rounding bottom. The handle resembles a flag or pennant, and once completed can see the market breakout in a bullish upwards trend.

Price targets

It’s possible to use all the patterns discussed to target an eventual profit-taking point. In the case of the triangles and the rectangle, this is done easily by measuring the height of the pattern and then extrapolating the target out from the breakout point.

The same basic premise is applied to the rectangle. In the case of flags and pennants, the target is determined by measuring the height of the flagpole leading into the formation and then added on the way out. These formations are sometimes referred to as measuring formations because they often occur halfway through the price swing.

How to recognise chart patterns

Chart patterns can sometimes be quite difficult to identify on charts when you’re a beginner and even when you’re a professional trader. Luckily, we have integrated our pattern recognition scanner as part of our innovative Next Generation trading platform. Our pattern recognition scanner helps identify chart patterns automatically saving you time and effort.

The pattern recognition scanner collates data from over 120 of our most popular products and alerts you to potential technical trading opportunities across multiple time intervals.

Using popular patterns such as triangles, wedges and channels, coupled with our bespoke star rating system, the pattern recognition scanner updates every 15 minutes to continuously highlight potential emerging and completed technical trade set-ups.

Summary

  • You should recognise basic price conditions required for a pattern to be genuine
  • You should know how to tell when a pattern has failed
  • You should be able to generate a sensible risk-management plan in line with your pattern-recognition skills

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