How to manage risk and trades & target consistency?

How to manage risk and trades & target consistency?

How to determine which direction to trade any pair?

How to time low risk and high reward entry points.?

How to project in advance high odds profit objectives?

How to know well in advance high odds profit objectives?

How to track smart money traders like the banks & follow them?

As well as create a tip on building your forex business.

Larry Williams  mentor of inner circle trader

Timing one’s self on the hours spent in the trading strategy and hope from one to the other stick to one to one and polish it up  by practice and on one technic then making another one after ma

You are a losing trader every time you enter into a trade until you close an active trade.

Don’t over complicated the trading  strategy

Simply let go of whatever you think you already know or understand about the market and trading it will be far easier on you if you do this is difficult for most to do and one of the primary reasons new traders start on the wrong foot.

Leave your ego at the door so that you will be able to raise the ladder of knowledge.

Chasing on systems with allot money will not solve the problem rater escalate it   fast manipulate the system to suit your characteristic

Look at the bad habit you develop even on your demo account. the open assize of the account that you have not the one you are not planning to start with

Higher time frame premises before you trade with the low time frame

Support and resistance

Support and resistance are one of the most widely used concepts in forex trading; strangely enough, everyone seems to have their idea on how you should measure forex support and resistance.

The beauty of support and resistance lies in its simplicity. Its validity has been tested over and over again throughout history and remains one of the most widely used analysis tools of all time. It works because it is based on simple crowd psychology. And as much as we don’t like to admit it, we are the same irrational creatures we were a few hundred years ago

If you could predict where the market is heading, you would be a millionaire. Unfortunately, no one has developed an indicator that will predict the future. Many indicators have been created that will give you a probable direction of the market, among them, the concept of support and resistance has risen to the top of support and resistance has been increased to the top of the pile.

Support is a price level where the market has difficulty dipping below it because the demand is sufficiently high at the level.  The support level is always on or below the current price. In other words, the support line is where the price stops falling.

Resistance is the opposite of support .it is a price level where the market has difficulty surpassing that price level because the selling force is strong at that price. Resistance levels are always on price .it is where the price level stops rising.

Strength of the support and resistance line

Each time the price of the currency pair touches the support or resistance, its strengthens its validity. A psychological barrier exists at that price which will prevent it from below the support line or crossing over the resistance line.

The support and resistance are given greater weight if it happens to lie on an even number. The psychological pressures are greater at these even numbers.

Our trading strategy recommendation from this support resistance levels is very simple; first of all, this support resistance trading strategy still needs to be filtering with fundamental analysis and candlestick basics knowledge.

PASR is an acronym for price action support resistance .these price levels are derived from prior price activity viewed on charts where swing high and lows display are actions off of a certain price area.

These price areas can subsequently function as either support or resistance in future market movement. Often, the price level where price penetrates to the upside.

Drawing in price action support and resistance levels is a discretionary art when viewing a chart, no matter what time frame.

Trend lines

Not a random drawing on the chart

There are rules to follow when drawing a trend line

Trend lines provide guidelines for price

Can be a support/resistance

Most of the time, trend lines are sloping

The degree of the slope indicates trend strength

Applicable to any chart timeframe

Trend line – uptrend

Look out for swing lows on the chart

Connect the low of the swings to form a straight line –lows and not the period close

Trend line must have at least 3 points of contact of the swing low

Indicates bullish momentum, more buyers than sellers

Trendline –downtrend

Look out for swing highs on the charts

Connect the highs of the swings to form a straight line-highs and not the period close

Trend line must have at least 3 points of contact of the swing high

Indicates bearish momentum, more seller than buyers

Applying support and resistance

There are six rules which can be used to draw effective support and resistance lines:

Rule 1

Support and resistance lines are zones, not specific points. Expect the price to reverse in this general area; do not expect prices to turn about instantly. These areas of resistance can easily range up to 30-30 pips in size.

A general rule is that the higher the time frame chart used to draw a support/resistance zone, the greater the resistance of that area. Thus a line drawn off a 4-hour chart would have more significance than one based off a 15 minutes chart.

Rule 2

Wait for confirmation of a price reversal before jumping headfirst into a trade. Just because you set up an area where the price is likely to reverse does not mean you should enter a trade the second the price hits this zone. Instead, wait for a signal that price is reversing and then enter your position

It is critical to have some form of indicator confirming signal to let you know price is indeed retreating from the resistance area. There are several different indicators (MACD  RST  CCI) signals and candlestick formations that can be used to confirm a reversal in the forex markets. A few basic ones are covered only in this section.

Rule 3

Instead of mentally noting where an area of resistance is, use a thick solid line that can be found in almost any forex charting package. Play with the positioning of the line and choose the position that visually fits the forex chart best.

Concentrate on fitting the line to the curves and tops of trends. Play around with your forex charting package. Sometimes a particular charting style offers too much information.

Rule 4

Identify support and resistance areas. Find areas that not only exhibit support or resistance but ones that act as both a support and a resistance zone.

Look for areas that have shown both support and resisting characteristics over a period of time. These will be the best lines as they show strength on both sides and because of this, reinforce the validity of the line.

Rule 5

The best support and resistance areas have been around for a long time. Like a good wine, support and resistance zones only get better, or this case stronger, with age

The longer a support /resistance line has been around, the stronger that line tends to be. This proves specifically useful when a currency pair approaches an area it has not traded near for a long time. In addition to that, support and resistance lines are stronger on longer time frames. That is to say that a support /resistance zone on a daily forex chart is stronger than a support/resistance line drawn on a 15 minutes chart.

Rule 6

These rules are intended to help you find significant support and resistance zones, but by no means are they the only rules that you should or could use. Play around with different forex chart and different time frames and see what you find most useful and most productive. Create rules that are simple and easy for you to follow. This way, you can continue to apply them later on in your forex trading career as well as easily adapt them if you come up with different ideas.

Clear the whole chart by removing everything, but the price draw the support and resistance like a pro.

You don’t want anything distracting your eye when you’re looking for the most important supports and resistance levels on a chart you can get. For this reason, I take off any moving t that I may use on my chart, and I highly recommend you do too.

Just remember: a clear chart with only price bars (candlesticks) is going to give you the best view of the market and the key levels you need to find and draw on it.

Support and resistance

Drawing support and resistance level like a pro

Step 1

Start at the weekly chart, draw in the long-term levels

The weekly chart is what I consider the best place to start in learning to draw in support and resistance levels because it provides you with the clearest view of the most significant long-term key levels you need to have on your charts.

Step 2

For example, I am going to take you through how I would draw in the support and resistance levels on the same market, for example, if I always start with the (GBPJPY), starting from weekly view.

You will notice in the example below, I have zoomed out a good distance on the weekly chart (about two years ) and place horizontal lines at what are the clearest and the most obvious price points or areas in the market where price changed direction.

Step 3

After you, ve identified and drawn in the key long-term levels on the weekly chart time frame, its time to drop down to what I consider the most important time frame; the daily chart.

At this point, you are now looking for any obvious/key levels that weren’t clearly visible on the weekly chart and that you may have overlooked. You are also going to close in obvious closer /near-terms levels. These near-term levels are more likely to come into play than the further out key levels, so they are important to identify and draw in.

Then adjustment of the support and resistance levels. That we drew on the weekly up or down slightly, I did this because after viewing them on a daily chart, it made sense to me, based on the position of the level relative to the bar high/low, to adjust the level slightly. This is totally fine, and you will find that as you view weekly levels on a daily chart, you sometimes will see a reason to adjust them slightly as for around 20-30 pips}}

Step 4

What to do on the intraday 4hour and 1hourcharts

The h4  and h1 chars are going to be mostly for review purposes. Meaning, you will review where the key weekly /daily and any daily near term levels are at because these levels are critical on the intraday time frames.

Most of the time I am focusing on the daily chart levels as l look at 4 hour or h1 time frames, rarely do  I find myself believing I need to draw in, more likely on the 4 hours that 1hour.

Step 5

The difference between key levels and near levels

You will notice in step 3 and 4 I labeled some of the daily chart levels  “near –terms levels ” these differ from the key levels primarily because they aren’t obvious on the weekly chart and they are closer or nearer to the current market place.

A key chart level will typically be obvious on a weekly chart, and a large or significant move will have occurred from, but near-term levels are imported as well.

There are some subtleties involved with drawing in support and resistance levels, and this difference between key and near- term levels is certainly one of them. You will need to use some discretion, and you will improve at determining which levels are key and which are near-term though training, time, and experience.

Step 6 how far back should I look for levels?

One question that many traders ask is how far back should I draw my levels?

It’s a valid question and one that is easily answered by simply looking at the example chart. Notice on the weekly chart I went back about two to three years, and on the daily about six months to one year, the h4 and h1 will typically be about 3months of data or less. Keep in mind, these are only estimates, but generally speaking, you don’t need to get back extremely far in time.

I believe that generally speaking, the further back in time you go, the less relevant the levels become, so I put more focus on levels over the last 3 to 6 months than in the previous 1 to 2 years for example.

Step 7 doesn’t cloud up your charts with levels.

I sometimes see traders with charts so full of lines that look like a three-year-old scribbled all over it. you  don’t need to draw in every single little level you see on your charts, you  only need to focus on the key levels and the most obvious near- them levels, as I showed you in the example above

Generally speaking, less is more in trading, and that applies to levels as well. If you draw in too many support and resistance levels, you will begin over analyzing the market, confusing yourself and getting analysis paralysis. Learning to draw only the most important chart levels, both key and near – term levels, isn’t too difficult and is something you’ll improve at through education /training, time, and experience.

Step 8, you won’t always be able to draw the lines exactly at highs or lows.

Remember that you don’t always need to draw the line perfectly touching the highs or lows of each bar, nor will you be able in many cases. Your line can and often should interest the body or middle of the tails of some of the price bars they connect.

At the end of the day, you need to use your discretion to determine where the most logical place to draw the level is . it might mean you hit a couple of bars high exactly, and a couple is intersected through the candle’s body; this is ok.

Step 9  support  and resistance vs. zones

Another key point to remember about support and resistance is that they often are not exact levels. Usually, you will want to draw in a more of a zone of support or resistance, you can think of these as value areas on a chart; where price preferred to trade recently and consolidated or stayed at for some time.

Channel trading in forex

Price channels are a trading concept that is borrowed from the traditional trend line concept. Instead of plotting a simple trend line, the price channels comprise of two trend lines, upper and lower trend lines. A trade signal is taken when price break s out of the upper or lower trend lines or the price channel. When combined with support /resistance methods, and candlestick patterns, trading price channels offers a great way to trade the markets. It is worth mentioning, however, that price channels trading price channels offers a great way to trade the markets. It is worth mentoring, however, that price channels trading requires quite a bit of practice and analyzing the market structure.

There are many different forms of channels that can be used. The most common price channel tools are:

Fibonacci channels

Linear regression channels

Equidistant channels

Standard deviation channels

Types of channels

Descending channel (lower highs and lower lows)

Ascending channel (higher high and higher lows)

Horizontal channel (ranging)

How to trade using channels

Allow a better perspective of the market structure compared to merely trading with trend lines. Long and short positions are initiated at the top and bottom ends of the channels, depending on the slope of the channel itself. Alternatively, traders can also be initiated when the channel is broken and successfully retest for support or resistance.

Channels are nothing support, and resistance levels plotted in aslope. The chart on the next page explains this in detail. Here, we notice that after using the high/low /high swing points, a downtrend channel is plotted. Notice how the swing points show a confluence with past horizontal support levels

As price action unfolded, we notice further down the channel of a small retracement towards the upper end of the channel. This offers a  good sell opportunity with a target booked at the previous support level.

Within the same chart, we also notice how breaks out of the channel only how to break out of the channel only to drop a bit further down to take support from the upper end of the channel. This is a classic channel break out pattern, where a retest of the channel break out of takes place before a new uptrend is established.

This chart gives another example of how the channel break out pattern plays out with a restest of the channel before resuming the uptrend.

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Channel trading strategy

It is probably best to trade breakouts from a channel rather than trading within the channel

trading channel breakout, the following criteria is used.

1 plot a channel connecting high/low/high or low/high/low

2 wait for the price to break out of the channel and to retest the channel

3 set stops at the low of the channel with entry at the break out price

4 set targets to support/resistance levels formed within the channel.

Candlestick patterns

In technical analysis, a candlestick pattern is a movement in the price shown graphically on a candlestick chart that some belief can predict a particular market movement. The recognition of the pattern is subjective, and programs that are used for charting have to rely on predefined rules to match the pattern. 43 recognized patterns can be simple and complex patterns.

Formation of candlestick

Candlestick is a graphical representation of price movement for a given period. They are commonly formed by the opening, high, low, and closing price of a financial instrument.

1  if the open price is above the closing price, then a filled (normally red or black ) candlestick is bearish.

2 if the closing price is above the opening price, then normally a green or a hollow candlestick (white with black outline)is bullish

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Big black candle

Has an unusually long black body with a wide range between high and low .price open near the high and close near the low. considered bearish pattern

Big white candle

it has an unusually long white body, with a wide range between high and low of the day. Prices open near the low of the day. Prices open near the low and close near the high. Considered a bullish pattern.

Doji

They are formed when opening and closing prices are virtually the same. The lengths of shadows can vary.

Types of Doji candles

Dragonfly Doji

Formed when the opening and the close price are at the highest of the day- if it has a long lower shadow, it signals a more bullish trend. When appearing at the market bottom, it is considered to be a reversal signal.

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Gravestone Doji

Formed when the opening and closing prices are at the day.if it has a longer upper shadow, it signals a bearish trend. When it appears at the market top, it is considered a reversal signal.

Long-legged Doji

Consists of Doji with very long upper and lower shadows. Indicates a strong force balanced in opposition.

Hanging man

A black or white candlestick that consists of a small body near the high with little or no upper shadow and a long lower tail. The lower tail should be two or three times the height of the body. Considered a bearish pattern during an uptrend.

hammer

A black or white candlestick that consists of a small body near the high e little or no upper shadow and a long lower tail considered a bullish pattern during a downtrend

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Inverted black hammer

A black body in an upside-down hammer position. Usually considered a bottom reversal signal.

Long lower shadow

A black or white candlestick is formed with a lower tail that has a length of 2/3 or more of the total range of the candlestick. typically considered a bullish signal when it appeared around price support levels

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A black or white candlestick with an upper shadow that has a length of 2/3 or more of the total range of the candlestick. Normally considered a bearish signal when it appears around price resistance levels.

Murobozu

A long or normal candlestick (black or white) with no shadow or tail. The high and lows represent the opening and closing prices. Considered a continuation Patten.

Shooting star

A black or white candlestick that has a small body, a long upper shadow, and a little or no lower tail. Considered a  bearish pattern in an uptrend.

Spinning top

A black or white candlestick with a small body. The size of the shadows can vary. Interpreted as a neutral pattern but gains importance when it is part of other formations.

White body

It is formed when the closing price is higher than the opening price and considered a bullish signal.

Shaven bottom

A black or white candlestick with no lower tail.

Shaven head

A black or white candlestick with no lower tail.

bearish harami

consists of an unusually large white body followed by a  small black body (contained within the large white body ). It is considered as a bearish  pattern when preceded by an uptrend.

Bearish cross

A large white body followed by Doji. Considered as a reversal signal when it appears at the top

Bearish three method formation

A long black body followed by the three small bodies (normally white )and a long black body to finish the pattern.  The three white bodies are contained within the range of the first black body. This is considered as a  bearish continuation pattern.

Bullish three method formation

Consist of a long white body followed by three small bodies (normally black)and a long white body. The three black bodies are contained within the range of first white body .this is considered ad a bullish continuation pattern.

Bullish harami

Consists of an unusually large black body followed by a small white body (contained within the large black body ). It Is considered as a bullish pattern when preceded by a downtrend.

Bullish cross

A large black body followed by a Doji. It is considered as a reversal signal when it appears at the bottom.

Dark cloud

Consists of a long white candlestick followed by a black candlestick that opens above the high of the white candlestick and close well into the body of the white candlestick. It is considered as a bearish reversal signal during an uptrend.

Engulfing bearish line

Consists of a small white body that is contained with the followed large black candlestick. When it appears at the top, it is considered as a major reversal signal.

Engulfing bullish line

Consists of a small black body that is contained within the followed large white candlestick. When it appears at the bottom, it is interpreted as a major reversal signal.

Evening  Doji star

Consistis of three candlesticks first is a large white body candlestick. Followed by a Doji that gap above the while body, the third candlestick is a black body that closes well into the whole body. When it appears at the top, it is considered as a reversal signal; it signals a more bearish trend than the evening star pattern because of the Doji that has appeared between the two bodies.

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Evening star

Consists of a large white body candlestick followed by a small body candlestick (black or white) that gaps above the previous. The third is a  black body that closes well within the large white body. It is considered as a reversal signal when it appears at the top level.

Falling window

A window (gap) is created when the high of the second candlestick is below the low of the preceding candlestick. It is considered that the window should be filled with probable resistance.

Morning Doji star

Consists of a large black body followed by a Doji that candlestick followed by a Doji that occurred below preceding candlestick. On the following day, a third white body candlestick is that close well within the white candlestick, which appears before the Doji. It is considered a major reversal candlestick, which appeared before the Doji. It is considered a major trend reversal signal that is more bullish than the regular morning star pattern because of the existence of the Doji.

Morning star

Consists of a large black body candlestick followed by a small body (black or white)that occurred below the large black body, candlestick. On the following day, a third white body candlestick is formed that closed well into the black body candlestick. It is considered as a major reversal signal when it appears at a bottom.

On neckline

In a downtrend, it consists of a black candlestick followed by a small body white candlestick with its close near the low of the preceding black candlestick. It is considered as a bearish pattern when the low of the white candlestick is penetrated.

Thre black crows

Consists of three long black candlesticks with consecutively lower closes. The closing price is near to or at the lower closes. The closing prices are near to or at their lows. When it appears at the top, it is considered as a top reversal signal.

Three white soldiers

Consist of three long white candlesticks with consecutively higher closes. The closing prices are near to or at their highs. When it appears at the bottom, it is interpreted as a bottom reversal signal.

Tweezer bottoms

Consists of two or more candlesticks with matching bottoms. The candlesticks may or may not be consecutive, and the sizes or the colors can vary. It is considered as a minor reversal signal that becomes more important when the candlesticks form another pattern.

Tweezer tops

Consists of to or more candlesticks with matching tops. The candlesticks may or may not consecutive, and the size or the color can vary. It wants is considered a minor reversal signal that becomes more important when candlestick forms another pattern.

Doji star

Consist of a black or a white candlestick followed by a Doji that gap above or below these . it is considered as a reversal signal with confirmation during the next trading  day

Piercing line

Consists of a black candlestick followed by a white candlestick that opens lower than the low of preceding but closes more than halfway into black body candlestick. It is considered a reversal signal when it appears at the bottom.

Rising window

A window (gap) is created when the low of the second candlestick is above the high of the preceding candlestick. It is considered that the window should provide support to the selling pressure.

In conclusion

Now you should have a basic understanding of how to find reversals using advanced candlestick patterns, gaps, and volume.

Candlestick charts offer a more vivid depiction of price action than what a standard bar chart can provide. Candlestick patterns in and of themselves are useful. However, there are many different names and interpretations of candlestick patterns, which often can induce confusion and can be hard to keep track of.

A chart pattern or price pattern Was a pattern within a chart when the price graphed. Chart pattern studies play a large role during technical analysis. When data is plotted, there is usually a pattern that naturally occurs and repeats over a period. Chart pattern is used as either reversal or continuation signals.

Here is some of the list we are going to cover

Triangle pattern

Flag pattern

Cup and handle pattern

Wedge pattern

Pullback pattern

Double bottom/top chart

Head and shoulders pattern

Inverted head and shoulders pattern

Pennant Patten

Channels

Triangles patterns

Triangles are believed to be the most essential and frequently emerged chart pattern in forex trading. They are sometimes termed as the holy grail of trading because of their reliability and effectiveness.

Types of triangle patterns

Symmetrical triangle

Ascending triangle

Descending triangle

Symmetrical triangle

Symmetrical triangle  ” bullish.”

The asymmetrical triangle breakout pattern is identified by the distinct shape of two symmetrical in nature. The pattern is formed by two trendlines that connect a series of sequentially higher swing/pivot lows and a series of sequentially lower swing/pivot highs. Price action is largely contained within the triangle formation traders typically look for buying opportunities once the price breaks out above the upper trendline of the triangle.

Background

Put another way, when price action forms a series of lower swing/pivot highs and higher swing/pivot highs and higher swing/pivot lows, a symmetrical triangle is created. Symmetrical triangle s can breakout in either direction since this consolidating pattern has equal sentiment driving the formation. Within an uptrend, the possibility of a breakout to the upside can increase. Due to the overall momentum of bullish sentiment supported by the potentially significant amount of underlying support in the chart.

Practical use

As with any pattern, the symmetrical triangle breakout is carefully assessed by the technical analyst because of their ability to produce subsequent upside or downside price action. Analysts will use other subsequent upside or downside price action. Analysts will use other charting cues to place the odds in their favor of the upside price movement.

Real-life example symmetrical triangle

Symmetrical triangle  “bearish.”

Definition:

The asymmetrical triangle breakdown pattern is identified by the distinct shape created by two converging trendlines symmetrical in nature. The converging trendlines are symmetrical in nature. The pattern is formed by two trendlines that connect a series of sequentially higher swig/pivot lows and a series of sequentially lower swig/pivot highs. Price action is largely contained within the triangle formation, and traders typically look for opportunities to sell short once the price breaks down below the lower trendline of the triangle.

Background :

Put another way; price action forms a series of lower swing/ pivot highs and higher swing/pivot lows in the context of an uptrend or downtrend. Symmetrical triangles can breakout in either direction since this consolidation pattern has equal sentiment driving the formation. Within a downside, a breakdown can increase due to the overall momentum of bearish sentiment supported by the potentially significant amount of overhead resistance in the chart.

Practical use

As with any pattern, symmetrical triangle breakdowns are carefully assessed by the technical analyst because of their ability to produce subsequent downside or upside price action. Analysts will use other charting cues to place the odds in their favor of the downside price movement.

Ascending triangle

Definition

As ascenf]ding triangle is a bullish chart pattern that consists of  trendlines:

A horizontal trendline at a level of resistance defined with no fewer  than two swing highs

An upward slanting trendline is connecting a series of higher swing or pivot lows.

Background :

The pattern starts to form when price action traces an orderly price decline from a swing high and stalls. A second pullback occurs as overhead resistance is decreased, and the stock then forms a higher swing low. This occurs over and over again until a series of equal swing high and higher swing lows are formed. The power of an ascending triangle can be greater after a powerful upside move due to the possible increase of underlying support.

Practical use:

Technical analysts realize that the ascending triangle can be stronger when the swing high that begins the pattern is also at an all-time high that begins the pattern is also at an all-time high due to the possible lack of future overhead resistance. Traders typically work into long positions when the price of the asset breaks above the upper resistance.

Descending triangle

Definition :

A descending triangle is a bearish chart  pattern that consists of two trendlines:

A horizontal trendline at a level of support defined with on fewer than two song lows

A downward slanting trendline is connecting a series of lower swing pivots highs.

Background :

The pattern starts to form when price action traces an orderly price rise from a swing low and stalls .the price then declines down to the prior swing low and stalls. A second rally occurs as underling support is decreased, and the stock then forms a lower swing high. This occurs over and over again until a series of equal swing lows and lower swing highs are formed. The power of a descending can be greater after a powerful downside move due to the possible decrease of overhead resistance.

Practical use:

Technical analysts realize that descending triangles can be strong when the swing low that begins the pattern is also an all-time low due to the possible lack of future underlying support. Traders typically work into short positions when the price of the asset break below the bottom support.

Flag pattern

Bull flag trading pattern

Definition:

A bull flag is a price action within the context of an uptrend that produces an orderly price decline ng consisting of a narrow trend range comprised of lower swing/pivot highs and lower swing/pivot lows.

Background :

The success of a bull flag can be greater after a significant upside move due to the possible increase of underlying support. Bull flags can be stronger when the swing high that begins the pattern is also an all-time high due to the possible lack of future overhead resistance.

Practical use:

Traders interested in gaining additional confirmation by watching the sentiment read of a chart will often seek out bull flag patterns. Due to their ability to “prove” the lack of selling interest due to their ability  to “prove .”  The lack of selling interest during the timeframe  in question.

Flag pattern

Bear flag trading pattern

Definition:

A bear flag is a price action within the context of a downtrend that produces an orderly price increase consisting of a narrow trend range comprised of a higher swing/pivot comprised of higher swing/pivot lows.

Background:

The success of a bear flag can be greater after a significant downside move due to the possible increase of overhead resistance. The bear flag can be stronger when the swing low that begins the pattern is also an all-time low due to the swing low that begins that pattern is also an all-time low due to the possible lack of underlying support.

Practical use.

Traders interested in gaining additional confirmation by watching the sentiment read of a chart will often seek out bear flag pattern due to their ability to  “prove ” the lack of buying interest during the timeframe in quest.

The cup and handle trading pattern

Definition:

A cup and handle pattern is formed after a pullback from a swing high rallies back strongly to the prior swing high and stalls due to overhead resistance. The price action then stalls much like a bull flag with slight downward pressure before breaking out of overhead resistance.

Background:

The power of a cup and handle lies in the fact that after hitting overhead resistance from the prior swing high,  a minor correction is put in. The demand for security may be increasing.

Cup and handle patterns can be stronger when the next logical place of resistance on after the breakout is a considerable distance away.

Practical use:

Technical analysts often use a cup and handle patterns as buying opportunities because of their ability to “prove” the lack of selling pressure during  the timeframe being assessed.

Wedge pattern

Rising wedge trading pattern

Definition :

A rising wedge is a chart pattern within the context of an uptrend composed of two upward sloping trendlines connecting a series of highs and higher swing/pivot lows.

Background:

The power of a rising wedge can be greater after a moderate upside move due to the possible decrease of underlying support as the pattern is formed.

Raising wedge can be stronger when the series of higher swing highs and higher swing lows that formed the pattern narrow down into a point/apex as bulls become less interested in buying.

Pratical use

Technical analysts will use rising wedge patterns as the beginning of selling opportunities, especially when in context with other tradable sell short setups. In addition, traders will often simply avoid further buying opportunities when they occur in the context of a rising wedge.