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Thursday, June 16, 2022 " # $ % & ' (

Forex Chart Patterns – A Complete Guide

In Forex Market, the chart pattern plays a big role to predict the future movement of the market
in an easy way.

One of the main parts of Technical analysis is Chart Patterns. It is an easy trading skill if you
practice more with different market charts. Become Professional trader using the below
technical chart patterns.

Head and Shoulders pattern

Triangle patterns
Pennants
Flag
Rectangle
Wedge
 Double Top & Double Bottoms
Triple Top and Triple Bottoms
Disadvantages of Trading Chart Patterns

What are Chart Patterns?

The set of shapes like Triangle shape, Rectangle shape, Dual top, Dual Bottom, and many other
shapes formed in the price charts is known as chart patterns.

HeadandShoulders InverseHeadandShoulders DoubleTop DoubleBottom

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TripleTop TripleBottom FallingWedge Diamond

BroadeninqTriangle SimmetricalTriangle Consolidation

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Flag Pennant AscendingTriangle DescendingTriangle

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CupandHandle RisingWedge Rectangle

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A Chart Pattern shapes are printed on all the market charts at any time. Traders keep watching
the price chart to find the patterns. Once the trader found a pattern, then it will give the signal
on where the price is going to move next?

Identifying the pattern shapes in the chart is very easy by using simple tools such as horizontal
lines, trend lines, Equidistant Channel lines, etc. Let’s see different types of chart patterns.

Different Types of Forex Chart Patterns

Forex Trading patterns are divided into 3 types depending on the market trend such as
uptrend, downtrend, Neutral trend(Ranging).

1) Continuation Chart Patterns

2) Reversal Chart Patterns

3) Neutral Chart Patterns

Continuation Chart Patterns

Continuation chart pattern appears when the market is moving in an Uptrend or Downtrend.
You can spot this pattern during the price correction or retracement happening in a trending
market.

For example: If the market is moving in an Uptrend, then it stops at some price and starts to
move down which is against the trend. During this time, you can identify the continuation chart
patterns.

Most popular continuation pattern charts are Pennants, Rectangles and Corrective Wedges.

Pennants
Pennants shape formed in the chart during the strong trend. The market takes a small break
during the trend and it forms a pennant pattern in the chart.
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 Pennant

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Pennant looks like the shape of the symmetrical triangle, as both triangle and pennant are
bound by trendline support and resistance lines. The difference is that pennant appears during
the trend, but triangles can be formed during both trends and general consolidation periods.

Pennants could be bearish or bullish depending on the trend direction. When a pennant
occurs during a trend, it has the potential to push the price in the direction of the overall trend.

How to trade pennants?

Wait for a breakout of the Pennant pattern to enter into the trade.
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 BULLISHPENNANT
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Target
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 BEARISHPENNANT
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Target

If the pennant is formed, the minimum take profit target should be the number of pips moved
in the first wave of the pennant as shown in the chart picture.

A"er a breakout, the distance of the first wave inside the pennant should be your minimum
take profit target.

Flag Pattern
Flag pattern is similar to pennant pattern. Whatever rules applied in pennant chart pattern
applies to flag pattern too.

Flag
:
 Flag

Flag charting patterns can be formed during the retracement of the trend.

The only difference between flag and pennant is, Flag looks like a small channel (parallel lines)
in a trend.

Rectangle Chart Pattern

Rectangle shape formed in the chart when the market is moving up and down between
horizontal support and resistance levels. The market takes a long break from the trend move
and it keeps moving up and down between the certain price level.
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 Rectangle

During a trend, when the price starts moving sideways forming a rectangle, another trending
move is likely to occur once price eventually breaks out of the rectangle formation. This move
is likely to be at least as big as the size of the rectangle. Rectangles could be bearish or bullish
depending on the trend direction.

How to trade Rectangle?

You can take short term trades in the Rectangle pattern. If the market reaches the bottom
support of the rectangle, you can place buy trade. If the market reaches the Top of the
resistance, you can place a sell trade.
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 BULLISHRECTANGLE
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Target

Wait for a breakout of the Rectangle pattern to enter into the trade.
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 BEARISHRECTANGLE
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Target

Note: Always keep placing the trade depend on the trend. Example: If the market moving in an
Uptrend, place only sell trade a"er breakout confirmed at the Bottom Support of the
Rectangle.

How to confirm the breakout in trading? check here.

A"er a breakout, the distance of the first wave inside the rectangle should be your minimum
take profit target.

Wedge Chart Pattern

When the market forms higher highs and higher lows in a narrow path, it is known as a rising
wedge. A rising wedge will form either in uptrend or downtrend.
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 RisingWedge

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When the Market forms Lower highs and Lower Lows in a narrow path, it is known as a falling
wedge. A falling wedge will form either in uptrend or downtrend.

FallingWedge
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Wedge Pattern forms during both trend continuation and at the Trend Reversal.

Trend Continuation Wedge is called Corrective Wedge Pattern.

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Trend Reversal Wedge is called Reversal Wedge Pattern.

How to identify Corrective or Reversal Wedge?

Corrective Wedge pattern is a correction that happened during the trend which forms a
Wedge Shape in the Chart.

Reversal Wedge pattern is similar to Corrective Wedge, the only difference is Market will start
to reverse a"er forming the wedge. Whereas In Corrective Wedge, the market starts to
continue the trend.

We may not know whether the wedge is corrective or reversal until it breakout from that wedge
Pattern.

If the breakout happened in the trend direction, Then we can confirm it as Corrective Wedge.

If the breakout happened against the trend, it means market starts to reverse. Then we can
confirm it as a Reversal Wedge.

How to trade Wedges?

You can take short term trades inside the Wedge pattern at highs and lows of the Wedge. If the
market reaches the bottom of the Wedge, you can place buy trade. If the market reaches the
top of the wedge, you can place a sell trade.
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 RISINGWEDGE
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Target

Wait for a breakout of the Wedge pattern to enter into the Long term trade. Stop-loss should
be placed near to highs and lows.

Bonus: Wedge Pattern will breakout mostly at the 4th Touch of the Higher High or Higher Low.
Let’s look out this falling wedge Chart.
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 FALLINGWEDGE
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Target

I hope you are very clear now on how to trade the wedge pattern. If you have any questions,
please click here to ask now.

Reversal Chart Patterns

Double Top Pattern
It is a reversal pattern in an Uptrend, where market creates exactly two tops on the same price
level.
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 DoubleTop

There are 2 types of Double top

1) Traditional Double Top

If each top gap is within 9 months, then it is called “Traditional Double Top”.

2) Cyclic Double Top

If each top gap is more than 9 months (or) If the time taken to form each top is more than 9
months, then it is called as “Cyclic Double Top”.

Double Bottom Pattern

It is a reversal pattern in a Downtrend, where market creates exactly two bottoms on the same
price level.
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 DoubleBottom

There are 2 types of Double bottom

1) Traditional Double Bottom

If each bottom gap is within 9 months, then it is called “Traditional Double Bottom”.

2) Cyclic Double Bottom

If each bottom gap is more than 9 months (or) If the time taken to form each bottom is more
than 9 months, then it is called as “Cyclic Double Bottom”.

How to Trade Double Top?

If you saw a double top in the chart, wait for the confirmation of breakout at the recent low
level.

A"er breakout confirms at the recent low level, You can enter into the trade.
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 DOUBLETOP-forexedp.com

Target

The Minimum Double Top Target should be the same as the distance of the previous high to
low as shown in the image

How to Trade Double Bottom?

If you saw a double bottom in the chart, wait for the confirmation of breakout at the recent
high level.

A"er breakout confirms at the recent high level, You can enter into the trade.
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 DOUBLEBOTTOM
Target
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The Minimum Double Bottom Target should be the same as the distance(size) of the previous
Low to high as shown in the image.

Triple Top and Triple Bottom Patterns

Triple Tops and Triple Bottoms are same as Double tops and Double Bottoms. The only
difference is additionally extra one top or bottom formed in the chart.
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 TripleTop

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1) Traditional Triple Top

If each Tops gap is within 9 months, then it is called “Traditional Triple Top”.

2) Cyclic Triple Top

If each Top gap is more than 9 months, then it is called as “Cyclic Triple Top”.

How to Trade Triple Top?

If you saw a Triple top in the chart, wait for the confirmation of breakout at the recent low level.

A"er breakout confirms at the recent low level, You can enter into the trade.

The Minimum Triple Top Target should be the same as the distance of the previous high to low
as shown in the image

How to Trade Triple Bottom?

:
 TripleBottom

If you saw a Triple bottom in the chart, wait for the confirmation of breakout at the recent high
level.

A"er breakout confirms at the recent high level, You can enter into the trade.

The Minimum Triple Bottom Target should be the same as the distance(size) of the previous
Low to high, as shown in the image.

Head and Shoulders Pattern

Head and Shoulders Pattern is one of the Top Reliable chart patterns for technical analyst. It is
a strong reversal pattern. If these patterns formed in the chart, Market definitely needs to
reverse.
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 HeadandShoulders

If you look out the image, you can see the Middle Top looks like a Head and each side tops
look like shoulders. It’s like a Human right?

This is the reason we call this Pattern as Head and Shoulder.

This head and Shoulder pattern is a Reversal Pattern in an Uptrend.

But how about the reversal of downtrend?

It is just opposite of the ordinary head and shoulder pattern.

If the Head and Shoulders formed in the chart in an Inverted shape, it is known as “Inverted
Head and Shoulder”.

It looks like a person doing Yoga Ashtanga Headstand.

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:
 InverseHeadandShoulders

If you found this inverted head and shoulders shape in the chart, it confirms the Reversal
pattern in a Downtrend.

How to Trade Head and Shoulders Pattern?

If you saw a Head and Shoulders in the chart, wait for the confirmation of breakout at the
recent low level (Neck level breakout).
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 HEADANDSHOULDERS
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Target

Head and shoulders neckline is used to confirm the reversal. If the head and shoulders
neckline break, the reversal will be confirmed. A"er breakout confirms at the recent low level
(neck level), You can enter into the trade. Let’s see the inverse head and shoulder chart.
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 INVERSEHEADANDSHOULDERS
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Target

The Minimum Head and Shoulder Take Profit Target should be the same as the distance(size) of
the Head as shown in the image.

Triangle Pattern
Triangle shape formed in the chart when the market is making consolidation or correction.

The Triangle pattern takes a long time to break out, until that you can keep buying or selling
inside the highs and lows of the triangle.

There are 4 types of Triangle

1) Ascending Triangle

2) Descending Triangle

3) Symmetrical Triangle

4) Expanding Triangle

Ascending Triangle
Ascending Triangle has Higher lows, Equal highs. Ascending Triangle is formed during the
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Uptrend or retracement in a downtrend.

AscendingTriangle

Descending Triangle
Descending Triangle has Lower highs and Equal lows. Descending Triangle is formed during
the downtrend or retracement in an Uptrend.

DescendingTriangle

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1,
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Neutral Chart Pattern
Symmetrical Triangle
Symmetrical Triangle has Lower highs and Higher Lows in a narrow path. Symmetrical triangles
have two sides, which are approximately the same size and the same angle. This creates a
technical force equivalency, which creates the neutral character of the formation. The image
below shows how a symmetrical triangle appears:

SymmetricalTriangle
3-

Expanding Triangle
Expanding Triangle is opposite of the Symmetrical Triangle. it has higher highs and Lower
Lows.
:
 ExpandingTriangle

How to Trade Triangle Pattern?

You can take short term trades inside the Triangle pattern. If the market reaches the bottom
support of the Triangle line, you can place buy trade. If the market reaches the Top resistance
of the Triangle, you can place the sell trade.

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 SymmetricalTriangleTopBreakout
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Target

,
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 SymmetricalTriangleBottomBreakout
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Target

Wait for a breakout of the Triangle pattern to enter into the trade.

Let’s look out the Ascending Triangle and Descending Triangle take profit targets.
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 ASCENDINGTRIANGLE
Target
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 AscendingTriangleReversalPattern
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Target
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 DESCENDINGTRIANGLE
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Target
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 DescendingTriangleReversalPattern
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Target

How to confirm the breakout in trading? check here.

A"er a breakout, the distance of the first wave inside the Triangle should be your minimum take
profit target.

Are there any disadvantages when trading with chart patterns?

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Yes there’s some disadvantages of using chart patterns.

1) Watching too many chart patterns in the same market chart creates more confusion. It
makes you think, whether you should trade this pattern or that pattern. For instance, if you
found the triangles pattern and the rectangle pattern in the same forex chart, You may be
confused when to enter and exit the trade.

2) Over drawing on the chart patterns drives you crazy while taking the decision to enter the
trade. Stick with one-time frame first, don’t draw chart patterns more on all time frames, it
gives you idea where the market is moving. But if you want to enter at good opportunity earlier
at best trade setup, you need to look for higher time frame chart patterns first, next look for
lower time frame chart patterns to confirm the reversal or breakout in the market.

3) Draw chart patterns only at major price levels, don’t focus on drawing patterns in minor or
unimportant price levels.

4) Keep your chart clear while drawing the patterns, if you use indicator or other forex trading
tools in the chart. your chart looks so messy and busy, it will not help you to pick the trade at
the right opportunity instead it makes your mind tired and you may start to trade
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unconsciously.

5) Beware of fake breakouts while trading the chart patterns, don’t take any breakout trade
unless the breakout is confirmed. Want to know, how to confirm the breakout or avoid fake
breakout in trading? Click here to see the breakout examples.

6) There are more advantages when comparing to the dis-advantages of chart patterns. Trade
forex chart pattern carefully as per the strategy on “How to trade chart patterns?” as explained
above.

7) Chart patterns are not clear to draw using the candle charts when comparing to the line
chart.

Conclusion
Forex Chart Patterns are used for technical analysis to predict the future movement of the
market.

Chart patterns are divided into three types:

Continuation Chart Patterns

Reversal Chart Patterns
Neutral Chart patterns

The most popular trend continuation patterns chart are:

Flags
Pennants
Rectangles
Corrective Wedges
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 CONTINUATIONPATTERN BULLISHPENNANT

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FALLINGWEDGE

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The most popular trend reversal chart patterns in forex are:

Double Top/Double Bottom

Triple Top/Triple Bottom
Head and Shoulder
Reversal Wedges
Ascending/Descending Triangle

REVERSALPATTERN
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HEADANDSHOULDERS
RISINGWEDGE

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DOUBLEBOTTOM
FALLINGWEDGE

INVERSEHEADANDSHOULDERS

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One of the most popular neutral pattern charts is the Symmetrical Triangle. In Neutral chart
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patterns, the market may break either up or down. Catching the market a"er the confirmation
of breakout gives you more profits with small risk.
ASCENDINGTRIANGLE
BILATERALPATTERN
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SYMMETRICALTRIANGLE

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DESCENDINGTRIANGLE

All these forex chart patterns are traded depend on the reversal price movements using
reversal patterns and price breaks during the continuation chart pattern forex.

Forex Trading Technical Analysis got easier using the forex chart patterns. Trading chart
patterns are easier to identify the future price movement. Whether it is continuation patterns or
reversal patterns or neutral forex chart patterns, all types of forex trading chart patterns comes
under the price action trading journey.

Price action trading is one of the most successful trading strategies in fx trading. The forex
chart formations such as Triangle formations, Wedges form, rising wedge, falling wedge, price
breaks in continuation pattern, head and shoulders chart formations, reversals pattern
confirmation, price consolidation, double bottom chart pattern forms, Triple bottoms chart
formation, Triangle formation is all noticed along with the candlestick patterns such as bullish
engulfing candle price moves, bearish engulfing candle price move, Morning star, Evening star,
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pin bar, hanging man, Dojis, tweezers, hammer, spinning tops, three black crows, three white
soldiers, shooting star are all the best candlestick patterns for all price action traders. The price
trend shows price direction in forex patterns chart.

Whatever forex chart patterns display on your trading platform, Just find out which type of
chart pattern it belongs to whether it is continuation pattern or reversal chart pattern or Neutral
chart pattern. A"er finding the pattern type, you can trade between the demand and supply
zone for short term entry and exits, if price breaks from the pattern, you can enter into long
term trades.

The progress tracking of identifying the pattern and reviewing it o"en is very important to
become a professional forex trader. Practice currency trading chart analysis well with demo
account first,

Rising wedge, falling wedge, neckline of head and shoulders line, support and resistance
trading opportunity point the traders with best trading signals setup in the chart.

Using chart pattern gives great browsing experience for exploring all currency pair charts such
as EUR USD, GBP USD, USD JPY, XAU USD, etc. The perfect chart formation is visible only if
you keep drawing the trendlines, horizontal support and resistance levels.

For low risk, high reward trading opportunity, the starting point of the price move and the price
direction should be predicted using the trends and the necessary chart formation. The stop
loss order should be smaller and tight to avoid excess loss in trading.

Check the stop level of the broker to see how much risk you can take with your leverage option
on your trading account. Some brokers offer partner center with high IB commissions please
beware of them. they are stop loss hunters due to high spread even in major currency pair like
EUR USD, USDJPY, GBPUSD.

The stop-loss order line and the ask line should be enabled on your forex broker platform to
know the spread and visible stop loss price.

Forex chart patter with reversal chart and price action strategies help you to trade important
currency pairs such as EUR USD with small risk and high potential trading signal to make good
profits.

The reversals and trend progress market creates heavy demand and momentum in the markets
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to bring big movements and insights into the forex charts.

FAQ
What is Cyclic Double Top?
If each top gap is more than 9 months, then it is called as “Cyclic Double Top”.

What is Cyclic Double Bottom?

If each bottom gap is more than 9 months, then it is called as “Cyclic Double Bottom”.

Which forex chart patterns are best to trade?

Rectangle, Trend line, Channel, pennant, flag, triangle, rising and falling wedge, head and
shoulder are the most used forex chart patterns by professional traders world wide.

How to trade chart patterns in forex market?

First identify the patterns in the chart. If the market is inside the pattern, you can take short
term trades, if the pattern shape got broken, then you can place a long term trades to catch
big profits.

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