Hello and welcome to the next article. In this one, we are going to take a look at forex chart patterns, everyone loves them, everyone is trying to find that ideal cheat-sheet to help him achieve his trading goal with the easiest path possible.
As in everything in
But don’t look at those pieces of informations you are going to learn today as some 100% working hack, this will increase your probability a lot, but nothing in trading works all the time and sometimes
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Double Top Pattern
As Investopedia explains: “A double top is an extremely bearish technical reversal pattern that forms after an asset reaches a high price two consecutive times with a moderate decline between the two highs.”
This is all nice and sweet and what we are talking here is basic 2-touch resistance, but there is one crucial thing you should be aware while watching for this.
You can notice on my professional made drawing that we differentiate two types of scenarios. In the easiest explanation possible, in the first one which is bad, price didn’t take out previous swing high. These are the cases which I am not about out to trade, because the market did not get the liquidity from traders who were already in the short trade by stopping them out.
Of course, this might work, but it does not meet the requirements for forex trading strategy which we use in MasterThePrice Academy.
The good example is the case when price ran the previous swing high = took out shorts from the market and has enough power for continuation lower.
Let me show you some real trading examples.
You can see here on
You can see from this Fiber example price pushed to the resistance but didn’t touch any previous swing highs before selling off. You can see that everyone who shorted this move got immediately stopped out with a rapid move higher before price made a significant move lower.
Double Bottom Pattern
With every test of the previous support, which can become double bottom, we want to see run on a
Very clean example on this NZD/USD chart, the price made valid double bottom (run on previous swing low) and we found our entry on supply which turned demand now. If you want to learn more about the basics of our price action trading strategy you can take this Free 4-Day Trading Course.
In conclusion of Double Top and Double Bottom patterns. It is a wise approach to find areas in the charts where a lot of retail traders are experiencing the pain of being stopped out or squeezed. When price won’t run previous swing points, it does not mean that trade is completely invalid, but you should not be jumping into any trade without further confirmation in form of a break of market structure.
Triple Top Pattern
Coming back once again to Investopedia, we can find this
“A triple top occurs when the price peaks in the same area on three separate occasions, with pullback after the first and second peaks.”
We have different types of triple top pattern, basically what you want to see is some sort of stop run. My favorite case is the first one marked on drawing above. Where the highest high is made on the second touch and price also hit the supply zone. But the other two examples are valid as well and the last one is called Three Drive pattern.
Triple Bottom Pattern
In this case, I want to talk about the last Three Drive Pattern which was brought to my attention some times ago at paracurve website.
There is a lot of explanations online where people are using equal measured moves or fib retracement. I don’t really think you need any of that.
Easiest explanation I can give you here level reclaim after 2 consecutive stop-runs. This is happening a lot in forex but also in crypto as you can see for example on
Also, a thing you should bear in mind is that triple tops and triple bottoms are usually just third touches of support and resistance. If you have seen our Free 4-Day Trading Course you should know that with each touch of the level, a probability of the working setup decreases. This is why I really don’t pay too much attention for triple tops and triple bottoms. My favorite setups are 2nd touch into Supply/Demand or Three Drive Patterns.
Head and Shoulders
Head and Shoulders pattern is one of my favorite trading patterns and this is the last time you will hear me refer it as a head and shoulders.
My problem with this is simple. Same as with every pattern people are using these forex chart patterns based on psychological sentiment without understanding what is really happening in the chart. This can work for some, but it never worked for me.
A few years ago I stumbled upon a thing called over/under pattern it is basically the same as head and shoulders, but with a set of great rules and very valid price action behind it.
I will put just one chart here with a brief explanation but if you want to learn more about this pattern, you can take a look at weekly forex recap on USDCAD, or you can join our Academy where everything is explained in further details.
Wedges, Triangles, Pennants etc..
I never found any reason why to use any of these instead of they are classical forex chart patterns. It is much better for me to look for the strong horizontal or diagonal level and trade them.
Of course, it is up to you what you are going to use, I am not saying this is not working and I know traders who are having great results using there forex chart patterns, so if it suits you trading style, good for you.
I hope you really enjoyed the article. This is actually something I have never seen being talked about before and really wish that someone would show this informations to me
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