Currency Chart Patterns Worth Paying Attention To

The forex market is experiencing glorious volatility for day and swing traders. It is a major wealth-building opportunity for those who take advantage. I discussed some of the ways to take advantage in Things to Remember When Trading Volatile Markets. In that article, I mentioned that “biases kill me” in volatile conditions. Trying to predict which way the price will go will mean lots of missed profitable opportunities. I let the price lead and I trade with it. In other words, even if I am convinced the price of a pair will move one way, I am willing to trade in both directions, assuming I get a valid trade signal. This is something to keep in mind when looking at the chart patterns below.

The charts below are hourly charts. While trading off the hourly chart is fine, it is also possible to drop to the 15-minute or 5-minute and find even better entry and stop loss points (fewer pips risked). I like to look for short-term consolidations near the chart pattern trendlines, and then trade breakouts in either direction.

A consolidation breakout, near a trendline, that moves the price out of the larger chart pattern signals a breakout of the larger pattern.

A consolidation breakout, near a trendline, that moves the price back into the pattern signals the larger pattern is continuing.

Stop losses are placed outside the smaller consolidation on the opposite side from the breakout.

If the price stays within the pattern, I will often use the other side of the pattern as a profit target. The price will likely consolidate again near the profit target, providing another trading opportunity anyway.

If the price breaks out of the chart pattern, utilize a trailing stop loss.

Forex Chart Patterns to Watch

NZDCHF is getting squeezed toward the apex of a triangle pattern after a sharp price drop and rally.

A short trade recently occurred as the price consolidated on the 5-minute chart near the upper trendline and then broke to the downside.

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Disclosure: The author doesn’t have positions in these stocks currently, but may initiate positions if the stock prices slide a bit lower. None of the content in this article should be ...

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