Forex chart patterns
In order to effectively spot those patterns the Zig Zag indicator is highly recommended, along with MetaTrader Platform which allows the most complex charts.
Symmetrical triangle pattern
A symmetrical triangle pattern is considered to be a continuation pattern. They are formed by trend lines connecting higher lows, and lower highs which eventually meet to form the apex of the triangle.
Ascending triangle patern
The ascending triangle pattern is a variation of the symmetrical triangle. They are generally considered to be bullish patterns, and have higher forecasting abilities when formed in an up-trend. The top of the triangle is flat, while the bottom section has an upward slant.
Parabolic curve pattern
The parabolic curve pattern is probably one of the most sought after patterns, and often produces quick returns in a relatively short period of time. Most of the time this pattern will appear near the end of a major market move or advance, and often looks like a stair case which eventually ends and dives downwards.
Wedge pattern
The wedge formation looks very similar to a symmetrical triangle pattern. Wedge patterns are distinguished by their apparent slant either up or down (rising & falling wedges).
Falling wedges are generally considered to be a bullish signal often found in up-trends. They are formed with a series of lower highs and lower bottoms.
Descending triangle pattern
The Descending Triangle, also a variation of the symmetrical triangle, is generally considered to be bearish and is usually found in downtrends. The descending triangle pattern is characterized by a flat bottom with the top part having a downward slant.
Channel pattern
Channel patterns are most of the time considered as a continuation pattern, and usually continue in the direction of the main trend. Channels are formed by two trend lines running parallel to each other forming a rectangle shape, where prices bounce up and down between often forming double tops and bottoms.
The Head and Shoulders pattern is considered as a reversal pattern, and is most often and most reliable up-trends. Head and shoulder patterns are formed when prices are pushed upwards then fall back down to what starts the neckline. Prices are then pushed back up forming a new high then once again are pushed back down. Prices then go higher but not quite reaching the previous high point. They are then pushed back down to the neckline, and the pattern is completed once the neckline is broken. The neckline is formed with a trend line connecting the two low points of the pattern.
Cup and Handle pattern
As its name suggests, the cup and handle pattern is made up of two parts: the cup and the handle. The cup is formed after a strong market advance and has a rounded bottom. After the cup has been formed, the handle develops in the form of a trading range. Most consider duration of 2-4 months a good time frame for the cup to form and around 1 month for the handle. The handle section that is formed is generally around 5% below the old high point, and any lower than that is in most cases considered not to be a cup and handle pattern.
