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Tips and Trick
Chart Patterns Strategies

The chart patterns can provide excellent trading opportunities. They are two types - continuation and reversal. When we see a continuation pattern we can expect that the prevailing trend will continue, while a reversal patterns suggests a trend change. The chart patterns show that the market is in a phase of indecision and is taking its breath before the next trend move. The most popular continuation patterns are explained in www.chartpatterns.com. The following principles are valid for the chart patterns:

  • Market should be trending before the pattern is formed;
  • The longer the formation is forming, the bigger move can be expected after a breakout;
  • It takes more time for a bottom to be completed than for a top;
  • The flag waves in the opposite direction. Continuation patterns like flag, wedge and pennant should be formed as corrections of the previous trend;
  • Every chart pattern could fail and the first break out could be fake.

We suggest four basic strategies for trading of chart patterns:

Early Opening of Position

Early Opening

  • The pattern is formed and the support and resistance lines are touched at least 2 times by the price;
  • A short-term reversal pattern (e.g. candlesticks reversal) is formed on the support or resistance lines;
  • We open position after the price breaks above the high (for long position) or below the low (for short position) of the short term pattern;
  • After the position is opened we place stop loss and profit taking orders according to our money and position management rules.

Chart Pattern Breakout

Breakout

  • The pattern is formed and the support and resistance lines are touched at least 2 times by the price;
  • We place a buy order above the resistance line and sell order below the support line. If this is a continuation pattern we can place only 1 order in the direction of the previous trend;
  • We open position after the price breaks above the resistance line (for long position) or below the support line (for short position) chart pattern;
  • After the position is opened we place stop loss and profit taking orders according to our money and position management rules. The stop loss order could be placed below the low/above the high of the breakout bar.

Second Break of the Chart Pattern

Second Break

  • The pattern is formed and the support and resistance lines are touched at least 2 times by the price.
  • A breakout of the support or resistance line occurs but the price returns in the chart pattern;
  • We place a buy order above the high of the breakout bar (after upside breakout) or sell order below the low of the breakout bar (after downside breakout). If this is a continuation pattern we can trade only if the first breakout is in the direction of the previous trend;
  • After the position is opened we place stop loss and profit taking orders according to our money and position management rules. The stop loss order could be placed below the low/above the high of the breakout bar.

False Break of the Chart Pattern

False Break

  • The pattern is formed and the support and resistance lines are touched at least 2 times by the price.
  • A breakout of the support or resistance line occurs but the price starts to consolidate near the broken line;
  • We place a buy order above the high of the breakout bar (after downside breakout) or sell order below the low of the breakout bar (after upside breakout). If this is a continuation pattern we can trade only if the first breakout is in the opposite direction of the previous trend. Also we can look for better entry point at lower time frame chart (e.g. consolidation or reversal candlesticks pattern);
  • After the position is opened we place stop loss and profit taking orders according to our money and position management rules. The stop loss order could be placed below the low/above the high of the breakout bar.
 
Best Times To Trade Currencies
Forex is a 24 hour market and there will be good setups for profitable trades in the Asian, European and US sessions. It pays to look at historical price data on forex charts to see what time of the day you could be watching the market and what time you could be doing something else. The aim is to trade when the average trading range is worthwhile and stay out of the market when price is in a narrow sideways range.

There are good online and downloadable tools at forex market hours

The market opens on Monday morning in Wellington New Zealand .8 am Wellington time is 8pm GMT,9pm BST,4pm EDT (Sunday evening New York time)

 

 

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The market closes for the week at 4pm EDT on Friday.

where BST is British Summer time ,EDT is Eastern Daylight Time USA.Check your local time at http://forex.timezoneconverter.com

 

The most active pairs during the London session are EURUSD with 39% of the trading volume, GBPUSD with 23%, USDJPY with 17%, USDCHF with 6% and USDCAD with 5%.

 

New York is the second largest forex market place. The busiest time is 8am to noon EST. News releases can result in a volatile market.

 

Sometimes volatility is low in the Tokyo session and sometimes good moves occur. The USDJPY is the most active pair with 78% of the volume followed by EURUSD with 15% and EURJPY with 5%.

 
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