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Welcome to another educative post
It’s Here! 2 Major Forex Chart patterns Approved for getting started in chart patterns
I have approved of these 2 major forex chart patterns
What is the best forex pattern?
If you’ve been in search of forex chart patterns that work
You should read and master these 2 patterns
Do chart patterns work in forex?
Chart patterns work in all trading forms of the financial markets be it forex, stocks trading, cryptocurrency, or commodities.
Trading forex chart patterns is a skill that can improve day trading profit and margin.
What is Chart Pattern in Forex?
Forex chart patterns are formations of prices of an asset(s) in the financial markets showing either a continuation of a trend or a trend reversal.
These high profit candlestick chart patterns are unique in their formation by helping to know when the market price could reverse or continue in the initial trend.
There are some forex chart pattern cheat sheets available online for day trading. There are also many forex chart pattern pdf available for free download.
I do not advice mastery all chart patterns
Do not be a jack of all trades but a master of none!
What are the best forex chart patterns?
Are you looking out for the best forex chart patterns to master? These 2 chart patterns I am about to teach you will give you a rare edge over other traders.
The 2 Major Forex Chart Patterns
There are a handful of high profit candlestick patterns in the forex market
But these 2 patterns stand out for reversal patterns and continuation patterns.
In this post, we shall learn how to identify these two high probability trading setups and how to trade them effectively.
They are double top and double bottom chart patterns.
The double top and double bottom forex patterns are majorly used for trend reversal patterns but I will teach you how to use them as a trend continuation pattern.
Beginners who look to identify these patterns more can use a double top and double bottom indicator
There is a double top and bottom indicator MT4 and also double top and double bottom indicator MT5
We shall talk about how to trade double top and double bottom, the difference between double top and double bottom, and how to identify fake double top and double bottom forex patterns.
A double top chart pattern is majorly a reversal pattern formation that is seen when the price of an asset has moved in the upward direction of the trend.
When the price moves in this upward direction, it gets stuck at a peak of the trend
This peak is rejected while price bounces off it slightly, returns, and then bounce off again around that peak
Hence, the double top pattern is formed.
For every patient trader who always waits for a re-test of levels or zones, this chart pattern is easy and rewarding.
Identifying Fake outs with Double Top
In a usual double top pattern, the second top is unable to break the first top. But in a fake-out, the second top slightly breaks the first top (fake out), returns to the area and the double top pattern is formed.
Drawing a trendline perfectly can be used to identify this fake-out
The MACD indicator can also be used as a divergence pattern to identify this fake-out. Both RSI and MACD work perfectly for identifying divergence.
Double Top Within Divergence
How to identify this fake-out with the MACD or RSI indicator.
First, look out for the bearish divergence on the 4-hour time frame
Secondly, let price makes higher high while the MACD or RSI indicator makes a lower high
Then look out for a double top pattern on the 1-hour time frame or 30-minutes time frame.
Both price and indicator are used for this powerful strategy to have a higher reward.
Double Top Trend Continuation
This double top chart pattern can also be used to identify a trend continuation.
Trendlines are drawn on a daily time frame or a 4-hour time frame
Prices are noticed to bounce off the trendline, a double top is formed when the price bounces off within the move phase, the trendline acting as resistance.
This double top pattern can be on the 1-hour time frame, 30-minutes, 15-minutes, or 5-minutes time frame.
The double bottom is a major trend reversal pattern formation, but this trend differs from the double top because we only look out for buying positions in the double bottom.
Double bottom is formed when the price has moved downwards forming two troughs at the base of the price chart.
Here, the second bottom fails to break the first bottom in a usual double bottom chart pattern.
This is a strong indication that buying pressure is about to kick off in the market, meaning sellers are relaxing in the trade.
Hence, a trend reversal occurs.
Identifying Fake outs with Double Bottom
In a fake-out, the second bottom breaks the first bottom and some traders still engage in selling while it was a fake-out!
Always draw a perfect trendline and watch out for spikes
Wicks rejection, candlestick chart patterns also help to identify these fake-outs.
Double Bottom Within Divergence
First, look out for bullish divergence on the 4-hour time frame
Secondly, let price makes lower low while the MACD or RSI indicator makes a higher low
Then look out for double bottom pattern formation on the 1-hour time frame or 30-minutes time frame.
The price of an asset and MACD or RSI indicator are both used for this strategy.
Double Bottom Trend Continuation
This double bottom chart pattern can also be used to identify a trend continuation or a break of trend.
Trendlines are drawn on a daily time frame or a 4-hour time frame slopping upwards.
Prices are noticed to bounce off the trendline, a double bottom is formed when the price bounces off within the move phase, the trendline acting as support.
This double bottom pattern can also be on the 1-hour time frame, 30-minutes, 15-minutes, or 5-minutes time frame.
Pro-Tips: Double top and double bottom consist of a neckline, until this neckline breaks the reversal is yet to take a ride.
Watch out for the trendline to break if you’re looking to take a reversal trade.
Stop-loss is placed above the peak or below the trough
Take profit is set at the beginning of the rise or fall of price.
The 2 major forex chart pattern is a focus for both beginners and intermediates looking to earn more in the financial market with a killer strategy.
This strategy is used with other strategies learned in our previous posts.