Our team at Trading Strategy Traders is launching a new series of articles. They can be found in Trading Strategies Step by Step Strategy Charts. These articles will enhance and improve your trading to a new level. This technique will give you a framework to methodically examine the fight between the bull and the bear.
By trading the most profitable graphic patterns, you can deduce who won the fight between the bulls and the bears. This strategy can be used to identify stock chart patterns. It is also used to identify any instruments that you are planning to use for day trading.
We share this because it will improve your ability to understand price movements and price breaks. Ultimately, this will make you a better trader. The key to this trading style is to identify how the pattern forms. You will also have a greater understanding of market analysis as a whole. This article will introduce some entry-level patterns and then dive into some specialty patterns.
This pattern is a symmetrical triangle and a double bottom. We also believe that it is important to use it with a pivot point. This type of training will set you apart from the average trader.
To get started, I recommend getting some basic stock charting software with some very simple tools, such as moving averages and other indicators. This can help you perform market analysis and also help you stay ahead of the charts when there are patterns. An ascending triangle will be a valuable pattern in your trading arsenal.
Bottom patterns, head and shoulders patterns, upside down head and shoulders, back head and shoulders, bottom three, cup and handle and descending triangle, are also valuable. These patterns will help you find trading ideas faster than what the average trader can find. It will help you ensure that you enter the trade at the right price level.
This type of pattern will allow you to trade any currency pair. Trading does not rely on market trends or the economic calendar to find successful trades during day trading. This write up will not be like any other blog article you have read. This is because we will give you step-by-step instructions on how to place trades using the exact price patterns for the strategy.
There are thousands of traders around the world who trade specific types of formations such as triangle patterns. Famous trader Dan Zenger turned $10,000 into $42 million in less than 23 months by using chart pattern trading strategies.
To really succeed in trading, you can just start imitating what professional traders do. Start to test the strategy and then measure the results.
We have dedicated a lot of time to studying price action. You can see some evidence by studying some pure common chart pattern strategies here:
- Forex Strategy: How to Turn Bullish Flag Patterns
- Simple Wedge Trading Strategy for Big Profits
- Price Bar Loan Trading Strategy Price
Let’s go ahead and define exactly what we see. More importantly, we will determine how we can profit from them.
What are Chart patterns?
In technical analysis, chart patterns are simply price formations represented graphically.
Without a doubt, this is one of the most useful tools when performing technical analysis of price charts. Chart patterns are a very popular way to trade in any market. The most profitable chart patterns give us a visual representation of power supply and demand. They also indicate the relative strength of a particular price level.
If we are on the topic of supply and demand, we suggest to study more on this subject here: Supply and Demand Trading-Learn about Market Movement.
What makes chart patterns so interesting is that they also bring to light what is happening behind the scenes. This refers to buying and selling pressure.
Note * Charts have their own language and they speak through chart patterns and they leave footprints of big money or smart money. These footprints can lead us into very profitable trades.
Why Are Chart Patterns Important?
If you remove all your indicators and momentum indicators from the chart, and everything that might make your chart less clear, and just look at the price action, whether it’s a 5-minute chart, a daily chart or something similar, that’s your time frame of choice. You will actually get more insight into what is happening in the market.
As long as the candlestick has open, high, low and close variables; you can use it only to confirm your position or enter a new trade. You can build a truly successful pattern trading strategy without the need for other technical indicators. Here is an example of a master candle setup.
There are bullish and bearish chart patterns. What makes them work is that they tend to come back over time, making it possible to digest them and find the probability of their success rate.
Chart Pattern Types:
Throughout this series of articles, we will discuss how to make money with the most profitable chart patterns. Some of the most profitable streak trading strategies include:
- Triple Top Pattern Trading Strategy
- Cup With Trading Strategy Handles
- Crouch and Run Chart Snippets
- Price Channel Patterns
- A symmetrical triangle
- Top Two Chart Pattern Strategy
- Double Bottom Chart Strategy Chart
- Rectangle Chart Pattern Strategy
- Forex Chart Patterns
- Reversal Chart Patterns
- And many more.
Earlier, we posted a clear price chart of EUR/USD. But if you take a closer look and read the patterns of the script language, we can identify the most profitable chart patterns (see picture below).
It doesn’t matter what time frame or market you trade because chart patterns are everywhere when there is a battle between buyers and sellers.
Let’s discuss how we can use trading strategies and make money trading in any market. The key is to look at the lower trend lines and try to find the bottom of the triple appearing anywhere on your chart.
Pattern Chart Trading Strategy – Rules
We have developed five important step-by-step guidelines to consider when trading any chart pattern:
Step 1: Always determine whether the market is in a trending or consolidating mode.
This step is important because, although some of these simple chart patterns are often forms of consolidation, they are actually continuation patterns of the underlying trend.
For example, a bullish flag pattern – read more about it HERE – is a pattern that forms after a larger move. The pattern itself is simply a breakout, or consolidation, from the underlying trend, before breaking into a new high.
Basically, a bullish flag pattern is a continuation pattern.
We can mainly distinguish two types of chart patterns:
- Continuation Pattern: a signal that the trend will continue.
- Reversal Patterns: indicate possible trends and the beginning of new trends.
An example of a reversal pattern is the double top pattern highlighted in the image below:
It is important to determine whether the market is trading or consolidating. This is because it will reveal what type of patterns are most suitable for each trading environment.
Note ** The reason why many price action traders fail is because they don’t follow this first rule. They try to trade every pattern without considering the whole picture.
Step 2: Determine What Chart Pattern You Are Using.
Do you like to trade reversal patterns or are you more comfortable trading continuation chart patterns?
Picture this first! Once you’ve decided which way to go, try to master a specific trading setup.
Repetition is the mother of all learning. The more you trade the most profitable chart patterns, the better you will see these chart patterns in real-time.
Our team at TSG are big fans of the triple top chart pattern. This is because of the profit potential that exists when a new trend has developed.
Step 3: Find Stories in Chart Patterns.
All you have to do here is build a story behind your favorite setup.
What do we mean by that?
In short, look at the overall price picture, don’t just focus on chart patterns. All you need is for this story to confirm your price action pattern. Everything must point in the same direction. Finding the right direction to place your trades will help you increase your win rate.
For example, the narrative behind the bullish flag highlighted in Step #1 is easy to see. We are moving in an uptrend as we have developed a series of highs and higher levels.
Second, we broker and close above the old high; no resistance seen above the market price is all good material. They speak volumes in favor of our rising flag pattern.
Step 4: Trading Chart Patterns Trading Strategy in Relation to Good Price Locations.
Chart patterns work well in conjunction with good price locations that can add to our trading encounters.
What do we mean by price location?
Simply put, a price location is simply an important area on a chart where we would normally expect a price reaction. That price location can be a support/resistance level, a swing high/low point or some pivot point. Location can also be a technical indicator if you combine the two.
For example, the price channel pattern highlighted in figure 3 was produced because we had a meeting with a higher time resistance level. EUR/USD is only trading in an ascending channel, but straight to the resistance level.
Step 5: Creating Non-Hakal Trading Rules for Trading Chart Patterns.
The final step to building a chart trading strategy is not just to have some non-subjective trading rules, but also to write them down and strictly follow your plan.
There are many possible ways a trader can profit from this chart pattern.
For example, a bullish flag pattern can enter on a retest of flag support or a breakout above the flag. You can also trade with the broken triangle strategy.
Master one setup strategy and one chart strategy only. Prove to yourself that you can trade a pattern before you make a move. In simple terms, find a pattern that you like and become very good at that graphic pattern trading strategy.
Conclusion – Trading Chart Patterns
We hope you enjoyed this article on trading chart patterns.
We can navigate careers quickly by providing you with the most profitable graphic patterns, which are easy. But one thing we can’t provide is screen time and experience. That’s something you need to get more than one period of time. Here is another strategy called volume trading in forex.
When it comes to chart pattern trading strategies, there is no magic bullet. This is because you will make mistakes. Second, you will still lose trades. The whole idea is to be selective on the chart patterns you trade.
Thank you for reading!
Please leave a comment below if you have any questions about our Chart Pattern Trading Strategy!