PRICE CHART PATTERN TRADING

Trading with: Flag, Pennant, Wedge, Double Top, Triangle, Three Crows, Symmetrical
Channel, Spike, Gap, Tower, Three Stair Steps, Flat Breakout, Inverse Head & Shoulder Patterns.

Derek Salvon
 All rights reserved.
No part of this book may be reproduced or used in any manner without the prior written permission of the copyright owner, except for the use of brief
quotations in a book review. ©Derek Salvon. 2023
What Are Forex Patterns?
Types of Forex Patterns
Understanding a Head and Shoulders Pattern in Forex
The 3 Most Powerful Candlestick Patterns in Forex
The Head and Shoulders Pattern (S-H-S) in Trading Charts
Broadening Formation Chart Pattern
Trading the Broadening Formation Pattern on the GBPUSD Chart
The Volume Candlestick pattern.
The Triangle chart pattern.
Double Top chart pattern.
The Triple Bottom and Triple Top chart pattern
Trading The Triple Top and Bottom Pattern
The Head and Shoulders pattern
Inverse Head and Shoulders chart pattern
The Wedge Chart Pattern
The Flag Pattern
Bullish and bearish pennants
The Bearish Pennant.
Bullish Pennants vs. Bearish Pennants: What Sets Them Apart?
The Broadening Pattern
Diamond Chart Pattern
Recognizing and Utilizing the Diamond Pattern in Forex Trading
Bullish Diamond Pattern:
Bearish Diamond Pattern Simplified
Trading with the Diamond Chart Pattern
Diamonds vs. Head and Shoulders Patterns:
The Spike Pattern
The Volume Candlestick Pattern
The Tower Chart Pattern
The Three Crows pattern
The Cube pattern
The Tweezers pattern
The Gap Pattern
The Mount Pattern
The Symmetrical Channel Pattern
The Three Steps Pattern
The Flat Breakout Pattern
Conclusion
What Are Forex Patterns?
Forex Price patterns are like special clues on a map that help traders predict where prices might go. These patterns
are based on how prices moved in the past. Imagine looking at a treasure map, and you notice that certain spots on
the map always lead to hidden treasures. That's kind of like what Forex patterns do for traders.

At first, traders drew these patterns on paper, and they looked like shapes you might learn in geometry, such as
triangles, squares, or diamonds. Later, as technology improved, traders found more and more patterns. Now there
are over 1,000 different patterns that traders study to help them make better decisions.

These patterns can tell traders when it's a good time to buy or sell a currency. It's a bit like knowing when to buy or
sell a stock when it's going up or down. One of the earliest and most famous patterns is called the "Triangle" pattern,
which comes in a few different forms, like ascending triangles, descending triangles, or symmetrical triangles. These
patterns help traders find the right moments to trade in the Forex market.
Types of Forex Patterns
Forex patterns can be grouped into three main categories, each with its own story about where prices might go. Here
are the three major types of patterns:

1. Continuation Patterns:

Think of these patterns as a signal that the price is likely to keep moving in the same direction it was already going.
It's a bit like a train that's been chugging along and is expected to keep on its track.
Some common continuation patterns include:
● Rising wedges
● Rectangles and
● Pennant

2. Reversal patterns

Reversal patterns are like a warning sign that the current trend might be coming to an end. It's as if the train we
mentioned earlier is about to change its course. These patterns suggest that the price is going to turn around and head
in the opposite direction. Examples of reversal patterns include:
● Double and triple bottoms
● Double and triple tops
● Head and shoulders patterns
● Inverse wedges
● Ascending and descending triangle
 3. Bilateral Patterns:

Bilateral patterns are a bit like a mystery – they suggest that something new is about to happen, but it's not clear
which way things will go. It's like standing at a crossroads in a forest, and you're not sure which path to take. These
patterns can appear during flat trading (when prices aren't going up or down much) or when the price is moving in
the same direction.

They can be significant because they signal a potential new trade opportunity, but you need to be ready to act when
the price breaks out in one direction or the other.
Understanding a Head and Shoulders Pattern in Forex

Imagine you're looking at the above chart of the EURUSD currency pair's price movements, and you see some
special shapes that look like arrows. These arrows help you spot a pattern called the "Head and Shoulders."
● Left Shoulder (Blue Arrow):
The first arrow, in blue, is like the left shoulder of a person. In the world of Forex, it represents a point where the
price was high, but then it went down a bit.
● Right Shoulder (Yellow Arrow):
The yellow arrow is like the right shoulder of a person. It's another point where the price went up a little after the left
shoulder.
● Head (Red Arrow):
Now, the red arrow is like the head of a person. It's a spot where the price went up a lot, kind of like reaching the top
of a mountain.

● Neck (Orange Arrow):

The orange arrow shows the drop in price after the head. It's like when someone starts coming down from the
mountain.
● Wedge Lines (Red Lines):
The red lines look like a wedge, and they show the pattern getting narrower. After the wedge, the price goes down.

This pattern is a signal for traders that the price might go down even more. It's kind of like a warning sign on the
road that says, "Caution: Price Going Down." Traders use these patterns to make decisions about when to buy or
sell currency in the Forex market.

The 3 Most Powerful Candlestick Patterns in Forex

In the world of Forex, traders have discovered special shapes in price charts that tend to repeat themselves. It's a bit
like finding familiar patterns or shapes in the clouds. When traders spot these patterns, they can make smart guesses
about where the price might go next. These patterns are called "candlestick patterns." Imagine these candlestick
patterns like secret codes that help traders make decisions in Forex:

● Triangles, Cubes, and Diamonds:

At first, these patterns looked like simple shapes you'd find in geometry class. People started marking these shapes
on their charts, and soon Forex traders realized they could predict where the price might go based on these shapes.
It's like having a treasure map.
 ● Rules and Analysis:
As time passed, traders created clear rules for each pattern, and this led to something called "graphical analysis." It's
a bit like having a set of instructions to read the treasure map. These patterns, along with support and resistance
levels, help traders predict price movements.

In simple terms, these candlestick patterns act like road signs that tell traders when to buy or sell currency. They are
the key to unlocking the potential for profit in the Forex market.

Now, let's talk about the three most popular and useful candlestick patterns in Forex. These patterns are like the most
valuable clues on the treasure map, and both new and experienced traders use them to make smart trading decisions.

The Head and Shoulders Pattern (S-H-S) in Trading

Charts
This is the pattern that takes the third spot, and it's known as the "Head and Shoulders" pattern. This pattern is a bit
like finding a hidden treasure on the map of price movements. It's a valuable tool for traders, and it ranks third in
terms of popularity and importance. Just like discovering a treasure, understanding and using the Head and
Shoulders pattern can lead to successful trading in financial markets.

The Head and Shoulders pattern is a widely recognized reversal pattern in Forex trading. While it may be easier to spot this pattern on a line chart, it's
recommended to make trading decisions based on candlestick charts for better accuracy and effectiveness.
Understanding the AUDNZD Price Chart
In the world of Forex trading, we often look at price charts to find important patterns. One such pattern is the Head
and Shoulders, and it comes in two variations.

1. Direct Head and Shoulders Pattern (Red):

This looks like a double top formation and is a sign of a possible trend reversal.

2. Inverse Head and Shoulders Pattern (Green):

This resembles a double bottom pattern and is another signal of a potential trend change. Both of these patterns are
known as reversal patterns.

Now let's focus on how to make a buy trade when you spot an inverse head and shoulders pattern (the green one):

● Find the Lows: Look for three consecutive lows that form the head and shoulders pattern. The middle low
should be lower than the other two (or higher if it's the direct pattern).
● Draw a Trend Line: Connect the highs with a line, and this becomes your neckline (in purple).
● Wait for the Breakout: You should consider buying when the price breaks above this neckline.
But here's a crucial point. Before the first low of the head and shoulders pattern forms, make sure there was a clear
downtrend. This trend should be at least twice as deep as the middle low of our pattern. If there's no such trend, the
pattern isn't valid for trading. In our example, there is a valid trend, so the pattern can be used.

When trading with patterns, use pending orders (not market orders):
Place a "buy limit" at the price level just above the pattern's neckline (Buy Price 1).

● Set a "take profit" level by measuring the distance between the lowest point of the pattern's middle low (the
head) and the neckline in points, and then add this distance above the buy limit price. Subtract about
15%-20% from this distance for your take profit (Take Price 1).
● Put a "stop loss" at the level of the low point of the entire pattern plus 15%-20% (Stop Price 1).

These steps help you make smart trading decisions based on the inverse head and shoulders pattern in the Forex
market.
Broadening Formation Chart Pattern
The Broadening Formation pattern takes the second spot in terms of popularity and significance.

This pattern is more easily visible on a line chart because candlestick charts can sometimes make it harder to see the highs and lows clearly.

Trading the Broadening Formation Pattern on the GBPUSD Chart

Take a look at the raw price action chart of GBPUSD above, where you can spot the "Broadening Formation." This
pattern appears like an upside-down (inverse) triangle.
Now, let's understand how to make buying and selling decisions based on the signals provided by this pattern:

1. Spot the Pattern: First, find a price pattern that resembles the one shown in the Forex chart above.
2. Identify Highs and Lows: You should see at least 4 points that represent 2 highs and 2 lows within the
pattern.
3. Count the Waves: The movement of the asset's price from high to low and back is called a wave within the
pattern. You need to count the number of waves.
 4. Trade After Wave 4: You should start trading the pattern when wave 4 completes within it.
5. Typically Six Waves: Patterns like this often have six or more waves. In this example, we'll focus on trading
waves 5 and 6.
6. Buying in Wave 5: We enter a buy trade when clear reversal patterns follow wave 4 (Buy 1).
7. Set a "take profit" level at the point where wave 4 started (Take 1).
8. Place a "stop loss" just below the pattern's support line (Stop 1).

9. Selling in Wave 6: To open a sell trade, look for signs of reversal patterns following wave 5 (Sell 2).
10. Set the "take profit" at the level where wave 5 began (Take 2).
11. Put the "stop loss" above the pattern's resistance levels (Stop 2).
It's important to note that there is a significant risk associated with trading waves beyond the sixth one. The pattern
typically concludes with wave 6, and trading further waves can lead to rapid losses. So, it's crucial to be cautious and
make well-informed decisions when trading the Broadening Formation pattern.
The Volume Candlestick pattern.
This pattern is a crucial indicator and holds the first place in terms of significance and popularity. It's like having a
powerful tool in your trading arsenal that provides valuable insights into market movements.

This pattern is a gem among raw price action patterns used for technical indicator analysis. The Volume
Candlestick pattern resembles a candle with a tiny body and exceptionally long tails (wicks). It's often referred to as
a "volume candle" because it appears when significant trading volumes push the market in opposite directions, with
bulls pushing upward and bears driving it down.
As a result, when this candlestick closes, the market hasn't yet determined its new trend since demand and supply are
nearly balanced. However, this equilibrium doesn't last for long, and either buyers or sellers eventually gain the
upper hand, causing the price to move in one direction. So, it's only a matter of time before the price breaks through
the high or low of the volume candlestick, providing a clear signal to enter a trade and make the most of this pattern.

Now, let's delve into how to open buying and selling positions based on the signals generated by the volume
candlestick pattern.

This pattern comprises a single candle and is commonly observed in the 1 Day (D1) and 4 Hour (H4) Forex charts
time frames.
When you're hunting for a volume candlestick pattern, focus on the daily and four-hour charts (D1 and H4).
You should also keep the following in mind:

●Right Timeframes: Stick to the D1 and H4 charts.

●Check Shadow Length: Each shadow, excluding the candlestick body, should have at least 400 pips long.
●Body Size: The candlestick body shouldn't be longer than 1/10 of the entire formation.
●Color Doesn't Matter: The color of the candlestick body is not important. An ideal volume candlestick is a
doji.
● Pattern Validity: If the current market price hasn't broken through the low and high of the volume
candlestick, the pattern is valid.

Now, let's move on to executing trades:

● Place Pending Orders: Set a buy stop and a sell stop at the candlestick high and low, respectively (Buy
Stop Price 1 and Sell Stop Price 2).
● Take Profit: Set the price target profit at a distance shorter than or equal to the length of the corresponding
shadow.
● Stop Loss: Establish a sensible stop loss at the level of the opposite extreme, either low or high (Stop Price
2).
When the price reaches the level of one of the pending orders, your position will automatically open (Sell Price 2). Keep in mind that you should
manually cancel the opposite pending order when one of them is executed.

Here's the golden rule: Practice on a demo account first, then transition to the real deal. It's that simple! Wishing you
successful and profitable trades with these common Forex market chart patterns!
The Triangle chart pattern.
Now, there are various types of these triangles, like the ascending and descending ones. But here's the key – they all
work on the same principle.

These triangles belong to a group of "continuation patterns."

What does that mean? Well, when you spot one of these triangles on your charts, it's like a signal telling you that the
trend that was happening before the triangle showed up might keep going after the pattern does its thing.
It's like a little pause in the action before the trend starts up again. So, it's all about keeping an eye on these triangles
because they can be pretty useful in your Forex trading adventures.

Here's a chart with a symmetrical triangle that's not quite finished yet.

In simpler terms, think of a triangle as a sideways channel that shows up when a trend is winding down. It's like the
market taking a little breather. And then, when the price swings get really narrow, it's like a coiled spring ready to
burst. That's when the price breaks out of the triangle in one direction. Now, when you're trading a triangle, you
don't have to guess where the price is going because there are some clear rules to help you.

If you see a breakout above the triangle's upper boundary, you might want to consider a buy trade. You'd aim to exit
when the price has covered a distance roughly equal to the width of the first move up from the triangle's base. For
safety, you'd set a stop loss at the local low just before the upper boundary breakout. On the flip side, if you spot a
breakout below the triangle's lower boundary, it could be a signal to sell. You'd look to exit when the price has
moved a distance roughly equal to the width of the first move down from the triangle's top. To protect yourself,
you'd place a stop loss at the local high right before the lower boundary breakout.

One thing to keep in mind is that most of the time, the price will break out in the same direction as the trend that was
happening before the triangle formed. So if the trend was up, the breakout is more likely to be up, and if the trend
was down, the breakout is more likely to be down. This triangle pattern is also a big deal in Elliott wave analysis, a
more advanced technique. It usually signals a pause in the bigger trend, suggesting that the trend is likely to keep
going once the triangle is all done.
Double Top chart pattern.

This pattern is one of the simplest, but it's not always the most effective. In the world of technical analysis, a Double
Top formation is seen as a sign of a trend reversal. That means the trend that was happening before this pattern
started is likely to turn around once the pattern is complete.

The Double Top pattern looks like two peaks that are pretty much at the same level. These peaks can form a straight
line or a sloped one, but in the sloped version, you should pay attention to the bases of those tops because they need
to be parallel.

In this kind of analysis, a Double Top works out when the trend flips, and the price starts heading down. If, instead,
the price goes on to make a third peak at the same level, it becomes what's called a Triple Top pattern.
To confirm a double top pattern, the following conditions must be met:

1. There should be an uptrend or a prolonged upward movement.

2. The first peak should establish a resistance level.
 3. The second peak should be turned away or rejected from the same resistance level.
4. The price needs to break below a support level known as the neckline.

Let's examine a real chart example to illustrate these essential elements. Take a look at the H1 chart for
AUD/USD below:

Indeed, in the chart above, the market showed an extended upward move, but it encountered strong resistance,
leading to the formation of the first peak.

Following this, the market retraced to a support level and then made another attempt to break through the same
resistance level. However, it faced rejection again, forming the second peak.

At this point, we've identified the critical components:

1. The prolonged upward movement.

2. The first peak.
3. The second peak.
4. The neckline, representing the support level.

The double top pattern is only confirmed and becomes a viable trading opportunity when the market breaks below
the support level (the neckline).

Now, let's explore another chart example for a clearer understanding:

As evident in this H1 chart for NZD/USD, a clear double top reversal pattern has taken shape. It encompasses the essential components of a valid
double top formation, including the extended upward movement, the first peak, the second peak, and the neckline.

You can trade this pattern in two main ways: either when it breaks through the neckline or when it retraces and tests
the neckline, which now acts as a resistance level. In certain cases, you can even trade it right at the second peak if
there are additional factors at play, like a false breakout (a trap by big players) or a bearish divergence, creating a
convergence of signals at that level.

Now, let's talk about the psychology behind this chart pattern formation, which is crucial for your trading decisions.
Understanding why this pattern emerges in the market is key to having a solid rationale for using it as a trading
strategy for entering and exiting trades. To illustrate this, let's consider the EUR/NZD H1 chart below:
As observed in the chart, following an initial uptrend or extended upward movement, the price reached a resistance
zone. Here, sellers entered the market and successfully outnumbered buyers, resulting in a downward push. Take a
look at the chart below for a closer view of the subsequent developments:

Buyers made an effort to regain control of the market by attempting to push the price higher, leading to the
formation of a support level, known as the neckline.

As buyers pushed the price back up to the previous high, sellers regained strength and forced the price down to the
neckline. This raised doubts about the sustainability of the initial uptrend. Observing the waning strength of the
buyers and the growing dominance of the sellers, other market participants decided to enter short positions. The
outcome is shown below:
When the neckline, which is formed by the support level created by buyers, is broken, it signifies that sellers have
taken control, and a market reversal is probable.

Now that the double top is verified, more market participants join in, driving the price further down. The subsequent
price movement is illustrated below:

As you can see, after the neckline was breached, the market continued to decline. This occurred because all market
participants recognized that sellers had gained control. They also entered the market to capitalize on the downward
movement.

Now, let's discuss how to trade the double top chart pattern effectively. There are three Methods:

1. Wait for the neckline to be broken.

 2. Wait for a pullback to the neckline after the breakout.
3. Enter early when the second top is formed.

We will begin with the first method. Please examine the H1 chart of EUR/USD below:

You can see that the market is in an uptrend, signifying the dominance of buyers. However, the appearance of the
double top chart pattern signals a significant bearish reversal. In this scenario, your course of action is to patiently
await the neckline's breakout. You should enter the market at the close of the candlestick that breaks below the
neckline and position your stop loss above the resistance level of the double top.

To determine your profit target, you'll need to employ a rectangle or another tool to measure the distance between
the resistance level and the neckline. Allow me to demonstrate this on the chart below:
Initially, I calculated the distance (space) between the stop loss and the neckline and applied this measurement to
establish our profit target starting from the neckline. Please refer to the chart below:
As illustrated above, the price broke the neckline, which served as a strong signal to open a short position in the
market. Our stop loss was positioned above the resistance level, and our profit target was determined using the top's
height measurement. Now, let's see the subsequent developments from the chart below:

You can see that after the market

broke the neckline, there was a slight retracement before a strong downward move that ultimately reached the profit
target. To further illustrate, take a look at the chart below:

In this another EUR/USD H1 chart, we have a distinct double top pattern, indicating a bearish reversal signal.
As shown in the chart above, we've identified the neckline, serving as the support level. We'll patiently await a price
break below this neckline. To see how we initiate a trade, refer to the same chart below:
After the neckline was clearly broken, we entered the market. It's wise to wait for the candlestick to close below the
neckline to ensure the break is confirmed.
Our stop loss is consistently positioned above the resistance level, which corresponds to the double top. The profit
target is determined by measuring downwards from the neckline, taking into account the height of the double top. In
other words, you measure the distance between the resistance level and the support level (the neckline) and then use
that measurement to identify the profit target below the neckline.
Now, let's examine the subsequent price movement from the chart below:
Following the breakout of the neckline, the market moved down and precisely touched the profit target. Did you
notice that the market was swiftly rejected once it reached the profit target? This happens because many traders use
the same method to calculate their profit target.
Let's take a look at another example below:

The above chart is a 4 Hours time frame EUR/USD chart. In the chart, the market was in an uptrend, signifying that
buyers were leading the market. However, the appearance of the double top pattern suggested that buyers were
losing control of the uptrend, and a bearish reversal could occur.
When the neckline broke, it confirmed the validity of the double top pattern. That's when we can enter the market,
typically at the close of the candlestick that broke below the neckline. Our stop loss should be positioned above the
double top resistance level. On the other hand, our profit target can be set at the level I marked, which is the same
distance as between the stop loss and the neckline.
Now, take a look at the outcome:

Using this entry strategy for trading the

double top pattern has its pros and cons:

● You won't miss the trade when the breakout occurs.

● The success rate (win rate) is high, exceeding 90%.

Cons

● The risk-to-reward ratio may not be very favorable.

However, the risk-to-reward ratio might not be a big concern here. If you can win more than 90% of your trades,
you'll still be profitable.
This entry technique may not suit everyone, as traders have different personalities and trading styles. While some
traders may find it suitable, others may prefer different entry techniques that align better with their trading style.
The Triple Bottom and Triple Top chart pattern
The Triple Bottom chart pattern is essentially the opposite of the Triple Top and is formed in a rising market. To
validate a triple bottom pattern, it requires clear reversal signals and an upward price movement in classical analysis.
Triple tops occur when a stock's price hits the same resistance level three times, and triple bottoms happen when the
price drops to a support level three times. It's essential not to get too caught up in precise price points, as small
variations don't matter much. The key is to see that the price respects an important level on the chart, typically
within a range of 0% to 3% of the significant level.

TRIPLE BOTTOM
 TRIPLE TOP

These patterns are quite similar to each other. The only distinction is that we begin with an upward price trend,
followed by three resistance tops and then a price drop. The underlying idea behind triple tops and triple bottoms is
the same as with any other reversal chart pattern. Initially, there is a strong price movement in one direction, a
struggle between buyers and sellers, and subsequently, an initiation of a strong price trend in the opposite direction.
The crucial aspect of the triple tops and triple bottoms trading strategy is to spot the breakout level. Once this level
is breached, the price movement gains momentum.
Trading The Triple Top and Bottom Pattern
To trade triple bottoms, consider going long, and for triple tops, think about shorting. A general guideline is that the
price tends to retrace the full prior price move leading up to the formation of the pattern. As shown in the charts
above, the counter-trend retracement encompasses both the price and the time. For those who prefer a more
conservative approach, a reasonable target is the width of the formation.

Longing( Buying) The Triple Bottom

When we spot the triple bottom pattern, we position our trade trigger at the resistance line and gauge the potential
breakout target. As soon as the price breaks through the resistance line, it's the right time to initiate a long position.
The chart below provides a visual representation of this process.

Above is a 60-minute chart of Yahoo showing its price movements. Yahoo is in the midst of a significant bearish
trend, which later evolves into a triple bottom pattern. The blue circle marks the highest point within the triple
bottom formation. To determine the price target, we add the distance between this high point and the lowest low of
the pattern to the swing high (blue circle).
As soon as the price breaks through the resistance line (brown circle), we initiate a long position. The upward
movement amounts to $2.60 per share, surpassing the price target of the formation.

Selling (Shorting) Triple Top

Below is a 30-minute chart of Bank of America, showing the price movements from November 17 to November 23,
2015. Towards the end of its bullish trend, BAC's price begins forming three peaks. In addition to the three peaks,
we can also observe the lowest point of the pattern highlighted in blue. To calculate the price target, we take the
highest swing point, subtract the blue-highlighted low, and then add this value to the low point.

Once this support level is broken, we initiate a short position, as indicated by the brown circle. It's important to note
that stocks don't always move in the desired direction immediately. Many traders are monitoring the same price
action, so things may not always go as planned. For a conservative target price, we typically consider the width of
the triple top formation.
 Just like in our previous example with the triple bottom, the price action moved past our target.
Exit your positions
When it comes to exiting your positions in triple tops and triple bottoms, you can use the width of the formation
added to the high or low point as the easiest exit point. However, this may not always offer you the best chance to
maximize your trading profits.
Another option is to tighten your stops after reaching the target. Yet, it's important to be cautious because if you
become too focused on small gains, you might close the position prematurely.
The below chart example illustrates this concept:

Looking at this 30-minute chart of EBAY above. We entered a short position at the brown circle. We achieved our
target quite swiftly, as shown by the green circle. Assuming we had placed our stop loss order close to the target, we
would have closed our position almost immediately.
However, if we had closed the position at that moment, we would have missed out on an additional 60% profit. To
capture that extra 60%, I recommend incorporating the Elder's Force Index into your triple tops and triple bottoms
trading strategy. This index is an oscillator that combines current price, previous price, and market volume. It's
represented by a curved line that fluctuates above and below a zero level. The primary signal it provides is to go
short when the line is below zero and go long when it's above zero. Using the Elder's Force Index can help us exit
the market at the optimal time. So, once we reach our target, we can use this indicator as a trigger to exit our position
Here's the 30-minute chart of Blackberry for the period from September 25 to October 5. In this chart, you can see a
triple bottom formation where the price target was reached.
Now, let's examine the same example, but this time, we'll use the EFI (Elder's Force Index) to manage the trade.

Let me take a guess - you've probably noticed a litle difference.

In the first scenario (green circle), when we reach our target, the EFI remains above the zero line. So, we stay in the
market until the EFI crosses the zero level in a bearish direction. The results are more than satisfying.

In the second scenario (blue circles), we see the moments when the EFI crosses zero, and that's when we exit our
position. When we compare the two scenarios, we find that without the EFI, we achieve a profit of approximately 30
cents per share. However, when we use the EFI, we can capture profits of $1.05 per share. So, combining the Elder
Force Index with the triple tops and triple bottoms trading strategy gives you a better perspective on when to exit the
market.
Another option is to close a portion of your position when the price target is reached.

In summary
Triple tops and triple bottoms are highly dependable chart patterns.
The key distinction between triple tops and triple bottoms lies in the market direction.
Two main breakout trading strategies are involved:
● Shorting breakouts for triple tops.
● Buying breakouts for triple bottoms.
Once the breakout occurs, the initial price target is typically set at the width of the triple bottom or triple top.
The Elder Force Index serves as an excellent tool for determining exit points when trading triple tops and bottoms.
You also have the option to partially close your position as the market moves in your favor.
The Head and Shoulders pattern
The Head and Shoulders pattern is like a premium Triple Bottom pattern. In simple terms, it's a pattern in chart
analysis that signals a potential change in the trend. When you see a Head and Shoulders pattern, it often means that
the ongoing trend might reverse once this pattern fully forms.

Here's how to recognize it:

● It consists of three consecutive peaks (high points), with the middle peak being the highest (called the
"head") and the other two being lower and about the same height (the "shoulders").
● Sometimes, the shoulders may not be at exactly the same level, but the critical point is that the head peak
should be higher than both shoulders.
● To spot it, look for a clear trendline that connects the lows between these peaks; this line is called the
neckline.
● The pattern can appear in two ways: as a straight line or a sloping one, but in the sloping version, make sure
the bases of the tops align with the peaks.

The Head and Shoulders pattern typically suggests a potential trend reversal, so it's important to look for it when you
think the trend might change direction. If the price is still rising above the pattern's peak, it might not be a valid
Head and Shoulders pattern.

You can consider opening a sell position when the price breaks through the neckline and reaches or goes below the
low just before the neckline breakout (the "Sell zone"). Your target for profit can be set at a distance equal to or less
than the height of the middle peak (the "head") of the pattern (the "Profit zone"). To manage your risk, you may
place a stop loss around the level of the local high just before the neckline breakout or at the level of the right
shoulder (the "Stop zone").

It's also important to note that Head and Shoulders patterns are significant in Elliott wave analysis. These patterns
often indicate the end of a major market cycle and the beginning of a correction phase. They are frequently
associated with the completion of wave 5 and the start of wave A within the Elliott wave framework.
Inverse Head and Shoulders chart pattern
The Inverse Head and Shoulders pattern is the opposite of the regular Head and Shoulders pattern, and it typically
appears in a declining market. In this pattern, the neckline serves as a key resistance level to monitor for a potential
breakout to the upside. In traditional technical analysis, the Inverse Head and Shoulders pattern is considered a
reliable indicator of a potential upward trend reversal, signaling that the price is likely to start rising. Traders often
watch for this pattern to take advantage of potential opportunities for profit in a market that's changing direction.

You can consider buying when the price breaks above the neckline and reaches or goes beyond the previous local
high before the neckline breakout (Buy zone). To set your profit target, measure a distance no greater than the height
of the middle peak (head) in the chart (Profit zone).
For a suitable stop loss, you can place it at the level of the local low that occurred before the neckline breakout or at
the lowest point of the left shoulder (Stop zone). This strategy is often used by traders to potentially capitalize on an
upward trend when an Inverse Head and Shoulders pattern forms

The Wedge Chart Pattern

This pattern resembles a triangle, but there's a crucial difference. A triangle requires a clear trend to form, while the
Wedge pattern can develop in any direction, whether it's upward or downward.

In standard analysis, the rising Wedge pattern is categorized as a reversal pattern. This means it often signals a
potential change in the current trend direction.
Take a look at the chart above, which shows a recently formed wedge in the EURJPY price action chart.

Technically, a Wedge is similar to a Triangle, but there's a key difference.

A Wedge is usually much larger than a Triangle and can take months or even years to complete. Unlike a Triangle,
which can be smaller and quicker, a Wedge is a slower and more substantial pattern. In traditional analysis, both
falling and rising Wedges often indicate that the price is likely to move in the opposite direction to the current trend.
Essentially, they suggest that a trend reversal is on the horizon.

When trading a rising Wedge, it's a good idea to place a buy order when the price breaks above the resistance line
and reaches or surpasses the last local high before the resistance breakout (Buy zone). Sometimes, you might miss
about 3% of the price movement between the resistance breakout and your entry. For your target profit, aim for a
distance that's equal to or less than the width of the pattern's first wave. To protect your trade, set a reasonable stop
loss at the level of the local low marked before the resistance breakout (Stop zone).

Here are some additional rules to identify the rising Wedge pattern in technical analysis:

● Wedges are typically broken out at waves 4, 6, and every successive even-numbered wave. The first wave for
the Wedge, much like the Triangle, is the initial movement that started the pattern's development, in the
direction of the existing trend.

● Wedges are usually only broken out when the price has entered the final third of the pattern. You can
determine this by dividing the expected rising Wedge pattern into three equal parts and focusing on the
section where the support and resistance levels intersect.
The Flag Pattern
This pattern in forex is a straightforward and often short-term pattern, making it relatively easy to work with. This
pattern's effectiveness depends on various factors, and it's considered a simple one to identify. In technical analysis,
the Flag pattern is classified as a continuation pattern. This means that when you spot a Flag, it suggests that the
existing trend, which was in place before the pattern formed, is likely to keep going once the Flag pattern is finished.
The pattern typically looks like a small, corrective pullback in the opposite direction of the main trend, creating a
channel shape within the chart. In classical technical analysis, the Flag pattern usually leads to a continuation of the
current trend, rather than a trend reversal.

In the chart above, you can spot a Flag pattern that slopes downwards, indicating a potential upcoming price rise.

To trade this pattern, it's a good idea to enter a buy position when the price breaks above the pattern's upper
boundary and surpasses the previous local high (Buy zone). Your profit target should be set to capture a move no
longer than the trend that was happening before the Flag pattern emerged (Profit zone). For risk management,
consider placing a stop order at the level of the local low that happened just before the resistance was breached (Stop
zone).

Below are some essential rules for correctly identifying a Flag pattern:
● The angle of the Flag pattern, which is the channel within the chart, should not be wider than 90 degrees in
relation to the prevailing trend.
● The Flag channel itself should not extend below or above halfway through the preceding trend.
Bullish and bearish pennants
Trading bullish and bearish pennants is important for technical traders to grasp, as these patterns often foreshadow
significant price movements. Let's delve into how pennants function and the strategies for trading them.

What is a bullish pennant?

A bullish pennant is a pattern in technical trading that signals the likelihood of a robust upward price movement
continuing. This pattern takes shape after a market experiences a substantial upward surge, followed by a period of
consolidation, during which the price fluctuates within converging support and resistance lines.

For technical traders, this formation serves as a signal that the prior upward price trend is poised to recommence. As
a result, the bullish pennant pattern is highly coveted for providing an early indication of substantial upward price
momentum.

The bullish pennant pattern can manifest across various time frames. Day traders search for these patterns on second
or minute charts, while traders with a longer-term perspective identify ones that develop over weeks or even months.

How to recognize bullish pennants:

To spot a bullish pennant, you should keep an eye out for two key components. First, there should be a significant
preceding upward movement, often referred to as the 'pole.' Second, you should observe a price consolidation phase
that shapes a roughly symmetrical triangle with support and resistance lines.
It's crucial to avoid mistaking bullish pennants for other patterns like triangles, falling wedges, and bullish flags.

Here are the distinctions:

● In contrast to triangles, there's a substantial upward advance preceding the bullish pennant pattern.
● In contrast to falling wedges, the consolidation phase within a pennant is approximately balanced. In
contrast, falling wedges have both support and resistance lines sloping downward. Additionally, pennants
tend to be more compact than wedges.
● In contrast to bullish flags, the support and resistance lines in a bullish pennant shape a triangle instead of
running in parallel.

An additional clue signaling the formation of a bullish pennant is the declining trading volume as prices consolidate.
Then, as the market begins to break out of the pattern, there is a surge in trading volume.
What's occurring in a bullish pennant?
In a bullish pennant, a surge of positive sentiment drives the market upward (creating the pole). Following this
upward push, some of the buyers may decide to take profits, while bears perceive the potential for a retracement.
This equilibrium between supply and demand leads to a consolidation in price. However, this equilibrium can't
persist indefinitely. In a bullish pennant, the positive sentiment ultimately prevails. Traders who have been waiting
for an opportunity to buy the market jump in, propelling it higher once again.
The Bearish Pennant.
A bearish pennant is a technical trading pattern that signals the likely continuation of a downward price movement.
Essentially, bearish pennants are the opposite of bullish pennants: instead of consolidating after an upward move,
the market pauses following a significant downward movement. When technical traders identify a bearish pennant, it
serves as a signal that the downward price movement is likely to persist once the market breaks below its support
line. Similar to their bullish counterparts, bearish pennants can materialize across various time frames.

How to recognize a bearish pennant:

To spot a bearish pennant, seek out a period of consolidation between support and resistance levels following a
significant bearish price movement (the pole). The support and resistance lines should form a roughly symmetrical
triangle, indicating a market torn between positive and negative sentiment.

Similar to bullish pennants, diminishing trading volume often serves as a useful indicator of a developing bearish
pennant. Subsequently, trading volume experiences a rapid increase when the market breaks out of the pattern.
What's occurring in a bearish pennant?
In a bearish pennant, strong pessimistic sentiment drives the market lower (forming the pole). The sellers
responsible for the price decline may then decide to secure their profits, while bullish traders sense the potential for a
rebound.
As is the case with bullish pennants, this situation leads to a consolidation in the market's price. However,
consolidation cannot persist indefinitely. Without sufficient bullish sentiment to drive a recovery, the market once
again turns bearish. Once it breaches its support line, any sellers who had been holding back step in, propelling it to
new lows.

Recognizing both bearish and bullish pennants can be challenging initially because the consolidation phase is often
relatively small when compared to the preceding price movement.

Bullish Pennants vs. Bearish Pennants: What Sets

Them Apart?
Bullish Pennants Bearish Pennants

Arise when a market consolidates after a Arise when a market consolidates after a
significant upward movement. notable downward movement.

Signal the continuation of a bear market Signal the continuation of a bull market

Break out when the market surpasses its Break out when the market falls below its
resistance line support line

To initiate trades based on pennant patterns, you must plan.

● When to initiate a pennant trade
● Where to set profit targets
● Where to establish stop-loss levels

When to initiate a pennant trade

Pennants are highly sought after by traders because they frequently precede significant breakouts. Thus, when
trading them, it's crucial to pinpoint the ideal moment to enter your position and capitalize on the ensuing price
movement. There are two primary approaches to consider. The first involves waiting for the market to breach its
trend line: resistance for bullish pennants and support for bearish ones.

The second approach is to apply a common guideline that markets often experience a brief reversal before a full-
fledged breakout. In such instances, the former support levels become resistance, and resistance levels transform
into support. For instance, let's say the EUR/USD enters a bullish pennant and breaches its resistance line at $1.084.
This price point may transition into a support line as the market retraces its previous range before rallying higher. By
placing a buy order at $1.084, you can maximize your gains during the subsequent bullish upswing.
 Where to secure profits
In contrast to trading other chart patterns, it is uncommon to rely on the original range of a pennant to determine
your profit-taking strategy. Instead, the breakout typically mirrors the magnitude of the preceding bullish or bearish
movement that led to the consolidation.

To illustrate further with the EUR/USD example mentioned earlier, suppose the market had surged by 200 points
before pausing. As it surpasses the resistance level, technical traders would anticipate another 200-point price
movement.

Determining Where to Set Stop-Loss Orders

The placement of your stop-loss orders hinges on the specific entry approach you've adopted.

1. If you initiated your position immediately upon the market breaching the support or resistance, you
 should consider cutting your losses once it becomes evident that the pattern has been breached.

Typically, this is accomplished by situating your stop just beyond the opposite trendline:
● In the case of a bullish pennant, position your stop just below the support trendline.
● For a bearish pennant, place your stop just above the resistance trendline.

2. If you've opted to enter the market after it revisits its previous support or resistance zone, it's advisable
to position your stop a few points beneath your entry level. Striking a balance is crucial – you should
allow sufficient room for price fluctuations before a potential breakout, while also mitigating losses in
case the pattern fails.

In both scenarios, it's noteworthy that the distance of your stop-loss order is relatively close when compared to your
take-profit point. This aspect contributes to the attractiveness of pennants for traders, as these patterns tend to offer a
favorable risk-reward ratio. For instance, in an EUR/USD trade, you might be risking 10 or 20 points to potentially
gain 200 points.
The Broadening Pattern
The Broadening Formation, sometimes referred to as a megaphone pattern due to its visual resemblance to a
megaphone or reverse symmetrical triangle, operates on principles akin to those of traditional triangles. In classical
technical analysis, a broadening formation is categorized as a continuation pattern, although it often represents an
independent trend. This implies that the prevailing trend preceding the formation's inception is likely to resume once
the pattern concludes.

Technically, this chart pattern formation resembles an expanding sideways channel, which may occasionally exhibit
a sloping trajectory. The pattern unfolds as a result of price movements, with each new local trend marking fresh
highs and lows. Consequently, trading within the trend to identify price movements within the formation is favored
over expecting a breakout from the swing range, as is common with symmetrical triangles.
Similar to a triangle, the formation comprises internal waves where prices oscillate between highs and lows within
the pattern.

For a prudent buy entry, consider entering the market when the price, after reaching the support line, touches or
surpasses the prior local low preceding the current low (buy zone 1). The target for potential profit can be set at the
level of the local high, followed by the current high or higher (profit zone 1). To manage risk, place a stop loss
slightly below the low from which you entered the trade (stop zone 1).

Conversely, initiating a sell trade may be suitable when the price, after encountering the pattern's resistance levels,
reaches or exceeds the local high followed by the current high (Sell zone 2). The profit target in this scenario should
be positioned at the level of the local low or lower (profit zone 2). To protect against adverse price movements, set a
stop order above the local high from which you entered the trade (stop zone 2).

In addition, it's important to follow a few straightforward rules for correctly identifying a Broadening Formation
pattern and avoiding common errors:
● Begin trading within the pattern only after the fourth wave of the pattern has fully developed.
● Trades in the direction of the prevailing trend before the pattern's emergence tend to be more secure and are
more likely to reach the desired profit target.
● Consider placing stop orders not only beyond the local highs or lows but also beyond the support and
resistance levels of the formation to guard against false breakouts of these lines.

Diamond Chart Pattern

The Diamond chart pattern combines features of both the Triangle and Broadening Formation, making it a unique
shape in the world of forex.

This pattern is generally considered a reversal pattern, and it often resembles a modified version of the Head and
Shoulders pattern.

For a sell trade:

● When the price breaks through the support line within the pattern and reaches or falls below the local low,
indicating a support breakout, it's a sell signal (Sell zone).
● Your target profit should be set at a distance equal to or shorter than the width of the largest wave inside the
pattern (Profit zone).
● For risk management, place a stop loss at the local high just before the support line breakout (Stop zone).
Additional tips to enhance your Diamond pattern trading:
● The pattern occasionally continues the existing trend. In such cases, you can use pending orders or ensure
that the pattern's support and resistance lines are parallel.
● The most productive Diamond patterns are those with a single candlestick forming the largest wave, with the
high and low represented by the candlestick's shadows.
● Diamond patterns typically appear towards the end of extended trends, so it's advisable to search for them on
timeframes starting from 4 hours and longer.
Recognizing and Utilizing the Diamond Pattern in Forex Trading
The Diamond pattern is easily recognizable by its diamond-shaped appearance, bearing a resemblance to the head
and shoulders pattern. Here's an illustration of the Diamond Top on a GBP/USD chart for reference.

Process for utilizing diamond chart patterns in forex trading:

1. Begin by identifying the current upward or downward trend in the market.

2. Observe a period of sideways price action where the diamond pattern is formed.
3. Draw two trend lines connecting periodic highs and lows within the pattern.
4. Draw two additional trend lines connecting periodic lows and highs within the pattern.
5. Look for potential market entry points based on the pattern, whether it's a bullish or bearish setup.

Bullish Diamond Pattern:

The bullish diamond pattern typically emerges following a significant downward price movement. It features two
resistance levels that have contained previous price retracements and two support levels that have restrained the
downtrend.
Also referred to as the diamond bottom pattern, the bullish diamond pattern is a signal for potential buying
opportunities and often precedes a bullish breakout. The chart example below illustrates a bullish diamond pattern.
Bearish Diamond Pattern Simplified
The bearish diamond pattern emerges after a strong uptrend in price. It consists of two support levels that have
limited previous price retracements and two resistance levels that have countered the bullish trend. Also referred to
as the diamond top pattern, it's a signal to consider selling in the market. The chart below provides an example of
this diamond formation.

Trading with the Diamond Chart Pattern

Trading forex using the diamond bottom or diamond top pattern is straightforward. You need to identify your entry
point, establish a stop-loss, and select a suitable profit target.

Below is a simplified process:

1. Entry Point

Diamond patterns serve as reversal signals that anticipate an upcoming bullish or bearish breakout. Therefore, you
either buy or sell depending on whether the diamond pattern appears at the bottom of a downtrend or the top of an
uptrend.
● Sell below the diamond top pattern.
● Buy above the diamond bottom pattern.
This way, you can take both long (buy) and short (sell) positions using diamond patterns.

2. Stop-Loss

Place the stop-loss above the upper or below the lower boundary of the diamond pattern.
● Put the stop-loss above the diamond top pattern.
● Position the stop-loss below the diamond bottom pattern.
The specific location of the stop-loss within the diamond pattern may vary. Some traders prefer placing it above or
below the pattern's upper or lower boundary, while others use the opposite trendline as a reference.

3. Profit Target

Determining a profit target with the diamond top or diamond bottom pattern is relatively straightforward. You often
aim for a profit target that equals the pattern's height. However, there's some flexibility in setting profit targets.
Many traders opt to apply a fixed risk-reward ratio instead of using the pattern's height as a reference point.
Illustrative Trade Example
Trading a bullish or bearish diamond chart pattern is a clear-cut procedure. The example featuring USD/JPY below
offers a comprehensive step-by-step guide from start to finish.

Trade Execution Breakdown

● We first recognized the ongoing uptrend in the market.
● A diamond top pattern was identified.
● A sell order was initiated just below the pattern at 115.40.
● To manage risk, we placed a stop loss above the pattern at 115.73.
● The profit target was set at 114.96, providing a 1:1 risk-reward ratio based on the height of the diamond
pattern.
As the market unfolded, our take profit point was reached, resulting in a profitable gain of 44 pips.

Diamonds vs. Head and Shoulders Patterns:

At first glance, diamond formations and head and shoulders chart patterns exhibit visual similarities. In this context,
a bullish diamond pattern shares resemblances with the inverted head and shoulders chart pattern.

However, it's essential to highlight that diamonds can emerge at either the peak of an uptrend or the trough of a
downtrend. In contrast, head and shoulders patterns are typically confined to the upper sections of a bullish trend.
Both diamond tops and head and shoulders patterns serve as bearish indicators, providing traders with opportunities
to sell or short the market. The chart below provides a clear depiction of the head and shoulders pattern.
The Spike Pattern
A spike pattern represents a relatively substantial and rapid price movement, either upward or downward, within a
short time frame.
This pattern typically arises when a market reaches a state of equilibrium between supply and demand.

In standard technical analysis, the Spike is categorized as a type of reversal pattern. These patterns form when a
sharp local trend comes to an end, and the price movements gradually decelerate. Suddenly, there's a sharp surge in
trading volume, often occurring in a thinly traded market.

This surge in volume is swiftly balanced out. At this juncture, two possible scenarios unfold. First, a buyer or seller
attempting to disrupt the market's stability may withdraw their volume, causing prices to revert. Second, a larger
trading volume emerges in the opposite direction, counteracting the initial trader's volume and returning prices to
their prior levels.

Trading the Spike Pattern

Here's how to trade the spike pattern in an easy-to-understand way:
For a Sell Trade:
● Consider entering a sell trade when the price moves out of the sideways trend following the main pattern
development (Sell zone).
● Set your target profit at a distance equal to or shorter than the spike's height (Profit zone).
● For risk management, place a stop loss slightly above the local highs of the sideways trend, which occurred
before and after the spike (Stop zone).

Additional Tips:

1. It's essential to have short-term sideways trends (flats) before and after a spike appears.
2. Before the initial flat begins, there should be a distinct and strong trend that concludes with the trend.
3. The pattern tends to work best when the spike consists of just two candles, and it's preferable to trade
on timeframes longer than H1.
The Volume Candlestick Pattern
The volume candlestick pattern is quite unique because it's made up of just one candlestick. This pattern is
characterized by a candle with an exceptionally small body and very long tails (wicks). It's called a "volume candle"
because it materializes when there are substantial trading volumes in opposite directions in the market.
Consequently, by the time it closes, the market hasn't yet settled on a new trend since supply and demand are nearly
in equilibrium. However, this balance is usually short-lived, and either buyers or sellers eventually prevail, causing
the price to move in one direction. Soon after, the price is expected to break through either the low or high of the
volume candlestick, providing a signal for us to enter a trade and act on this pattern.

This pattern isn't commonly found in classical technical analysis because it was only discovered in the 1990s and is
seldom remembered today. In its current interpretation, this formation is more of a proprietary concept, with all the
order levels carefully devised and repeatedly tested.

You have the flexibility to enter trades in either direction, typically using pending orders such as Buy Stop and Sell
Stop.

For a Sell Position:

● Initiate a sell trade when the price reaches or falls below the local low of the volume candlestick (Sell zone
2).
● Set your target profit at a distance equal to or shorter than the space between the candlestick's open price and
its low (Profit zone 2).
● Place a stop loss at the local high of the volume candle in this scenario (Stop zone 2).

For a Buy Trade:

● Opt for a buy trade when the price reaches or surpasses the local high of the volume candlestick (Buy zone
1).
● Establish your target profit at a distance equal to or shorter than the space between the candlestick's closing
price and its high (Profit zone 1).
● For risk management, position a stop loss at the local low of the volume candle (Stop zone 2).

Tips to enhancing Your Volume Candlestick Pattern Trading:

1. The body of the candlestick should be at least ten times smaller than its overall length from low to
high.
2. Each tail should not be shorter than 400 pips.
3. This strategy is effective on specific timeframes, specifically H4 and D1
The Tower Chart Pattern
The Tower pattern is a candlestick arrangement comprising six or more candles. This pattern is widely recognized as
a reversal pattern and typically materializes at the conclusion of a trend.

Generally, the Tower pattern starts with a prominent trend candlestick, succeeded by a sequence of correction
candles, each having approximately uniform-sized bodies. Once this sequence of correction candlesticks is
concluded, there's a sudden move, usually consisting of one or two bars, in the opposite direction of the initial trend
candlestick.

You place a sell entry when bar 5 begins to emerge, along with all subsequent bars during the correction phase (Sell
zone). Place your target profit at a distance no greater than the height of the first candlestick in the pattern (Profit
zone). To protect your position, consider setting a stop loss slightly above the local highs of the sideways corrective
movement (Stop zone).
To enhance the effectiveness of this trading pattern and avoid common pitfalls, consider the following:
● Observe the illustrated pattern as one possible developmental scenario. Ideally, the pattern should encompass
5 to 6 bars, including one trend candle, four correction bars, and one final bar for the pattern's resolution.
● Typically, the pattern reaches its conclusion around the fifth corrective bar, although some patterns may
involve more correction bars. In such cases, adhere to the standard rules and initiate your trade on the fifth
bar.
● Exercise caution when placing your stop loss. Avoid setting it too close to the local highs or lows of the
correction phase, as this proximity may lead to premature activation due to market noise.
The Three Crows pattern
The Three Crows pattern, also known as the Three Buddhas pattern, is a candlestick formation characterized by the
presence of four candlesticks. When examined on a shorter time frame, it often resembles the Flag pattern. This
pattern is typically categorized as a continuation pattern, indicating its role as a form of a zigzag correction.

In this pattern, you'll typically find a single prominent trend candlestick, succeeded by three corrective candles with
identical body sizes. These candles should all align with the ongoing trend's direction and share the same color.
Once this series of corrective candles concludes, the market tends to experience a sudden surge with one or two long
candlesticks moving in the same direction as the initial candlestick, indicating the prevailing trend's continuation.
To initiate a buy position, it's advisable to wait for the closure of the third corrective candle and the subsequent
opening of the fourth candle (referred to as the Buy zone). Setting a target profit can be approached in two distinct
ways. The conventional method involves placing your target profit at a distance equal to or less than the length of
the first candlestick in the pattern, often referred to as the trend candlestick (termed as Profit zone 2).

Alternatively, you may opt for the second approach, which entails taking your profit when the price reaches the level
of the longest upper tail among all the candlesticks in the pattern (referred to as Profit zone 1). To manage risk, a
judicious stop loss can be positioned at the local low of the third corrective candle (referred to as the Stop zone).

To trade this pattern more effectively and minimize common errors, consider the following rules:
● The initial candlestick (first leg) should ideally consist of just one candle, and at most, two candles.
● The corrective candlesticks must have bodies of equal size; the length of the tails is not a primary concern.
● The body of the third corrective candlestick should not extend beyond half the height of the first candlestick
in the pattern.

By following these rules, you can enhance your trading strategy when working with this pattern, making it a more
efficient and reliable approach while helping you avoid common pitfalls.
The Cube pattern
This pattern, sometimes referred to as the Golden Cube, is a formation made up of four consecutive candles. When
you observe it on a shorter time frame, it often looks like the price is moving sideways or flat. In Forex, we typically
classify the Cube as a continuation pattern, but it often behaves like a correction pattern, creating what we call "flat
waves."

The Cube pattern usually consists of four candles that are all the same size and have alternating colors. These
candles should be long enough to create a shape that resembles a cube. It's called the Golden Cube because it occurs
frequently, around 90% of the time, on the XAUUSD price chart, which represents gold. Trading this pattern is quite
straightforward: when the fifth candle opens after four consecutive ones of equal size, you make a trade decision
based on the color of the first candlestick in the pattern. If it's red (or black), you consider a sell position, and if it's
green (or white), you think about a buy position.

To sell in the forex market using the Cube pattern, you wait for candlestick 5 to open after the appearance of four
consecutive cube-shaped candles (this is known as the Sell zone). Your target profit should be set at a distance no
greater than the length of the trend that was present in the market before the cube pattern emerged (this is the Profit
zone). To manage risk, you can place a stop loss at a distance equivalent to the length of any of the cube's
candlesticks in the opposite direction of your entry (referred to as the Stop zone).

Additional tips to help you trade this pattern effectively and avoid common mistakes:
● If the candlesticks are long and do not form a cube together, they create more of a rectangular shape rather
than a cube, and in such cases, you should not trade according to the pattern.

● The length of the tails on the candlesticks in the pattern does not significantly impact the pattern's
effectiveness.
● The ideal timeframe to trade this pattern is the H4 timeframe, as it tends to work best under these conditions.
The Tweezers pattern
The Tweezers pattern is a simple candlestick formation with two or more candlesticks, each having long, equal tails
(wicks). This pattern is generally seen as a sign of a trend reversal, typically occurring when the current trend is
about to change direction.

The tweezer pattern involves two or more candles with tails that reach the same level, and the tails should be at least
half as long as the candle's body. The most common Tweezers pattern is made up of just two candles. It's a popular
reversal pattern that shows up frequently in the market, and its significance can vary depending on the timeframe in
which it is spotted.

To start a sell trade in forex using the Tweezers pattern, you wait until the last candlestick of the pattern is finished,
usually the second one, and a new candlestick begins forming (this is your Sell zone). Place your target profit at a
distance no greater than one of the tails (wicks) of the candles within the pattern (also part of the Sell zone). For risk
management, consider setting a stop loss a few pips above the local highs marked by the candles forming the pattern
(this is your Stop zone).

In the usual version, the Tweezers pattern involves two candles, although you might encounter Tweezers formations
with three or more candles. If you're dealing with three or more candles, it's wise to set a stop loss at a considerable
distance, well above the tails. However, if the tails of the adjacent candles don't quite line up at the same levels and
have a slight difference, it's a good idea to avoid entering a trade based on this pattern.
For setting your target profit in this pattern, you can sometimes place it at a distance equal to or even shorter than the
longest candle in the pattern.

Some helpful guidelines to trade this pattern effectively and steer clear of common errors:
● Pay attention to the completion of the second candlestick in the pattern to enter your sell trade.
● Ensure that your target profit is within the range of one of the tails (wicks) of the candles in the pattern.
● To limit potential losses, position your stop loss a few pips above the highest points identified by the candles
forming the pattern.
The Gap Pattern
The Gap pattern is not a traditional pattern but rather a trading strategy that exploits price gaps. This Gap strategy is
founded on the recognition of two main types of price gaps in the modern market. The first type typically occurs
during breaks in trading on an exchange, while the second type results from fundamental factors influencing the
market. This approach focuses on exploiting the second type of gaps, specifically those arising during trading
sessions.

Based on Statistic, it is believed that financial instruments exhibiting gaps at the opening often revert to previous
levels before returning to regular trading. In essence, the price gap is viewed not as the onset of a new trend but as a
short-term response by speculators to a particular event, promptly absorbed by the market.

To implement this strategy, you initiate a buy position after the first candlestick following the price gap opens (Buy
zone). The target profit is set at a distance equal to or shorter than the gap itself; in other words, you take profit when
the price retraces to the previous close preceding the gap (Profit zone). A stop loss can be positioned at a distance
equal to or longer than the gap in the direction opposite to your entry (Stop zone).

Consider the following rules to enhance your trading efficiency while using the Gap Strategy.

1. Differentiating between the required type of gap and one resulting from a break in exchange operations is
relatively easy. The second type of gap occurs at a specific time determined by the exchange's working hours; gaps
occurring at different times are simply disregarded.
2. The required gap most frequently occurs in intraday time frames, specifically intervals starting from H1 and
shorter.
3. It is impractical to set a stop loss less than the target profit; it is advisable to place it at a considerable distance.
The Mount Pattern
The Mount pattern, while a bit uncommon, can be quite successful. It looks like the Three Crows pattern, but it's the
opposite. This pattern is typically seen as a reversal pattern, unlike the Three Crows, which signals a continuation of
the trend.

In a Mount pattern, you usually have one long candlestick indicating a strong trend, followed by three smaller
candles of the same color as the main one. This signals a continuation of the trend set by the big candle. The smaller
candles should have equal-sized bodies and follow each other in the direction of the main trend. Once the series of
small candles is completed, there is a sudden price jump with one or two candles in the opposite direction of the first
candle in the pattern.

To trade this pattern, you enter a sell trade when the first candle emerges after the three smaller ones (Sell zone).
Place your target profit at a distance no longer than the total length of the three smaller candles and the big
candlestick of the prevailing trend (Profit zone). A sensible stop loss is set a few pips above the local high of the
longest candlestick in the pattern (Stop zone).

Here are a few additional rules to trade using this pattern

1. The final entry candlestick is usually much longer than the three preceding candles, completely engulfing them.
2. The trend often occurs in the 4 hour time frame.
3. Sometimes, target profit is set at the level of the trend beginning just ahead of the pattern itself.
The Symmetrical Channel Pattern
The Symmetrical Channel pattern is a price pattern that takes a while to shape up. This pattern showcases two trends
that essentially correct each other. These trends are typically of equal length and development time, often resembling
two clear price channels. The strategy behind trading this pattern is based on the notion that the trend present before
the channels began developing will likely resume once the channels are complete.

The Symmetrical Channel is considered a reversal pattern. However, due to its substantial size, it tends to behave
more like an independent trend rather than a component of another one.

To trade this pattern, you open a buy position when the price breaks through the resistance line of the second
channel and reaches the local high before the breakout (Buy zone). Target profit can be taken when the price covers
a distance equal to or shorter than the trend present before the first channel emerges (Profit zone). A sensible stop
loss is set at the local low inside the second channel, marked before the channel's resistance is broken out (Stop
zone).

Consider the following rules to trade this pattern more effectively

1. As this pattern represents an independent trend, it's better to look for it in timeframes not shorter than D1.
2. The pattern is often identified well before the second channel is completed, allowing you to trade within the
channel.
3. Historically, there have been no cases where the pattern hasn't worked out as expected. Therefore, setting stop
losses might not be necessary, reducing the likelihood of the order being triggered by market noise.
The Three Steps Pattern
This pattern is a classic reversal pattern in technical analysis. This pattern illustrates one of the primary trend
scenarios in technical analysis, consisting of three momentums followed by a market reversal and correction upon
completion. The "stairs" in the pattern depict local corrective price rollbacks after movements in the main trend,
with the third stair marking the beginning of the overall corrective movement, defining the pattern's realization.
Trading this trend aligns with fundamental concepts of trend reversal chart patterns. If the trend is formed by two
stairs, indicating completion, traders anticipate the onset of reversal patterns typically initiated by the breakout of the
global trendline (the support line). The movement from the ongoing trend's high down to the support line breakout
constitutes the third stair of the pattern.
To trade the pattern effectively and avoid common mistakes follow these guidelines:

1. As the pattern is essentially part of the wave theory cycle, calculating the target profit should adhere to
the basic wave theory method using Fibonacci levels.
2. In certain instances, when the pattern is complete in longer timeframes, a cautious approach is prudent.
Enter a trade after the price reaches the local high/low following the breakout.
3. The stairs in the pattern often resemble local Flags, allowing traders to trade them within the
overarching Three Stair Steps pattern.
The Flat Breakout Pattern
The Flat Breakout pattern is more of a method for trading price channels than an independent technical analysis
scheme. Despite this, it's categorized as a pattern because of its consistent effectiveness.

This pattern resembles a typical sideways channel, often with a slope. The channel takes shape as the price moves up
and down, creating what is referred to as the "channel's waves." The key concept of the pattern is that its final wave
should be 50% of the channel's basic length. By drawing an imaginary line that evenly divides the channel, traders
anticipate a bounce off this line rather than a conventional breakthrough. After the rebound, the strategy involves
waiting for the price to break through one of the channel's boundaries and entering a trade in the breakout direction
at a distance equivalent to the base channel width.

To trade this pattern effectively

1. Open a buy position when the price, having bounced from the imaginary middle line, breaks through
the channel's resistance and reaches or exceeds the last local high of the channel (Buy zone).
2. Set the target profit when the price covers a distance shorter than or equal to the width of the broken
channel (Profit zone).
3. Place a stop loss a few pips below the last local low within the broken-out channel (Stop zone).

Additional considerations for trading this pattern:

● This channel breakout pattern is simple but can be challenging to identify, as it often occurs in short
timeframes.
● If the price breaks through the channel's middle line with a tail that reaches the opposite border but the body
of the candle doesn't break the centerline, the movement is considered a wave and isn't utilized for motive
realization.
● When setting stop losses, factor in market noise. Avoid trades where stop loss and take profit are less than the
average market noise for the specific financial instrument traded.
Conclusion
It's important to emphasize that all price charts in the realm of technical analysis within the Forex market are not like
laws; instead, they can be subject to various interpretations. However, as a general rule, the longer the time frame
you explore for a particular pattern, the more likely it is to manifest and potentially work out as anticipated.

In the ever-evolving landscape of Forex trading, there are now well over a hundred officially described patterns,
meticulously recorded in the register of technical analysis. Moreover, new patterns continue to emerge regularly. If
you've identified and defined your own pattern on the chart, don't dismiss it simply because it hasn't been
documented before. In fact, you may have uncovered a unique pattern that could prove profitable. The advantage of
possessing an unrecognized pattern lies in the fact that market makers are less likely to exploit it to ensnare
unsuspecting traders.

In summary, embrace the idea of enriching your Forex trading arsenal with novel approaches. If you've stumbled
upon a strategy or pattern that is not widely known, it could be your distinctive edge in the market. Remember, you
are your best market analyst, and innovation in trading strategies can be a powerful tool. Don't hesitate to explore,
adapt, and continuously refine your methods, for in the dynamic world of Forex, your ability to adapt and innovate
can be the key to success.