Ultimate Chart Pattern Trading Strategy Guide (With Stoploss, & Target) stocks, forex, crypto

Ultimate Chart Pattern Trading Strategy Guide (With Stoploss, & Target) stocks, forex, crypto

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the markets move in uptrends by forming higher highs and higher lows and move in downtrends by forming lower lows and lower highs however the markets only trend 20 percent and fluctuates 80 percent and that fluctuation leads into forming price patterns moreover price patterns do repeat over time as history repeats itself and they have been affecting the price movements and unfolding similar to how they did in the past which makes them predictable some price patterns indicate a change in the trend these are the reversal patterns while other patterns indicate a continuation of a trend and these are the continuation patterns generally the latter have higher probability of success because it does not involve trading against the trend a lot of youtubers have posted about market patterns but most of them do not mention how to properly trade them and where to place your profit target and stop loss which is extremely important to understand in order to trade these patterns successfully furthermore the following rules must be taken into consideration when identifying price patterns first the direction of the trend must be clear before forming a price pattern if a price pattern forms in a market that does not have a clear up or down trend then we must ignore it second the higher the time frame which the pattern forms at the higher the chance of success will be for example patterns that form on the daily chart time frame have a decent chance of success while the patterns that form on the one minute or five minutes chart should be ignored third you must wait for the pattern to fully form before taking the trade fourth since the reversal patterns involve going against the trend they can only be reliable if accompanied with a break of a strong resistance or support line more on that later in this video we will cover all the patterns and will provide real live trading scenarios to help you understand them so let's dive into it the double top pattern this is a reversal pattern before the end of an uptrend the price will retrace from the top then moves back up in an attempt to form a higher high but it fails to break the previous high and retraces back to test the neckline if it breaks the neckline then the double top pattern will be activated so how to trade this pattern you either enter right away as soon as it breaks the neckline or in order to improve your risk to reward ratio you wait for the price to first break the neckline and sell once the price retraced back to test the neckline the stop loss is placed above the top and the profit target is calculated based on the existing distance between the top and the neckline so if the distance between the top and the neckline is 150 pips for example then your target is 150 pips below the neckline here is a live example on the chart for a double top pattern on the british pound against the u.s dollar the price was trending up then found a strong resistance level and dropped down it moved sideways for some time then tested the strong resistance again and it faced a strong rejection here is the neckline and we only sell once the neckline is broken the price has finally broken the neckline and we enter a sell trade from here and according to the pattern rule here is where we place the stop loss and profit target the profit target is hit next is the double bottom pattern this is a reversal pattern at the end of a downtrend the price will bounce off the bottom then moves back down in an attempt to form a lower low but it fails to break the previous low and bounces back to test the neckline if it breaks the neckline then the double bottom pattern will be activated so how to trade this pattern similar to the previous double top pattern in the double bottom pattern scenario you either enter right away as soon as it breaks the neckline or you wait for the price to first break the neckline and by once the price retraced back to test the neckline which again will improve your risk to reward ratio stop loss is placed below the bottom and the profit target is calculated based on the existing distance between the bottom and the neckline so if the distance between the bottom and the neckline is 150 pips for example then your profit target is 150 pips above the neckline here is a live example on the chart for a double bottom pattern on the british pound against the us dollar the overall market trend was down until the price has hit a bottom it then made a strong bounce up and after some time the price went down and hit the previous bottom again and made another strong bounce back here is the neckline and we only by once the neckline is broken and according to the pattern rule here is where we place the stop loss and profit target the price has finally broken the neckline and we enter a by trade from here the profit target is hit next is the triple top pattern this is a reversal pattern similar to the double top pattern the triple top pattern will have the price bouncing off the neckline for a second time and then failing to break the top for the third time forming three tops if it breaks the neckline then the triple top pattern will be activated so how to trade this pattern similar to the double top pattern the triple top pattern is traded only after the break of the neckline and we calculate the stop loss and profit target exactly as we do in the double top pattern here is a live example on the chart for a triple top pattern on the british pound against the us dollar the price pushed upwards and got rejected by strong resistance then went back up for the second time and got rejected again and finally climbed up for a third test of the same resistance level and got rejected for the third time this is the nick line level and we only sell once the nick line is broken the price has finally broken the nick line and we enter a sell trade from here and according to the pattern rule here is where we place the stop loss and target profit the profit target is hit next is the triple bottom pattern this is a reversal pattern similar to the double bottom pattern the triple bottom pattern will have the price bouncing off the neckline for a second time and then failing to break the bottom for the third time forming three bottoms if it breaks the neckline then the triple bottom pattern will be activated so how to trade this pattern similar to the double bottom pattern the triple bottom pattern is traded only after the break of the neckline and we calculate the stop loss and target profit exactly as we do in the double bottom pattern here is a live example on the chart for a triple bottom pattern on the euro against the british pound the price fell down and bounced off a strong support level then bounced again from the same support level and after some time it has bounced for the third time this is the neckline level and we only buy once the neckline is broken the price has finally broken the neckline and we enter a by trade from here and according to the pattern rule here is where we place the stop loss and profit target the profit target is hit next is the head and shoulders pattern this is a reversal pattern it shows up during an uptrend and constitutes of three tops whereas the top which is located in the middle is called the head and is higher than the other two tops which are the shoulders whereas the left shoulder is higher than or equal to the right shoulder notice how the neckline connects the first price retrace bottom with the second retrace so how to trade this pattern you either enter right away as soon as the price breaks the neckline or to improve your risk to reward ratio you can wait for the price to first break the neckline and sell once it retraces back to test the neckline the stop loss is placed above the head while the profit target is calculated based on the distance from the top of the head and the neckline so if that distance is 150 pips for example then your target is 150 pips below the breaking point of nick line here is a live example on the chart for a head and shoulder pattern on the bitcoin against the us dollar the bitcoin was moving in a very strong uptrend it went up broke the previous high however it halted and went back down notice how many candles the pattern is consuming to complete its formation patience is key and then went back up again in an attempt to test the previous two highs but could hardly reach there signaling weakness in the market once it fell down now we have a great head and shoulder pattern notice how the neck line is tilted downwards instead of upwards moreover we only sell once the neckline is broken the price has finally broken the neckline and we enter a cell trade from here and according to the pattern rule here is where we place the stop loss and profit target the profit target is hit next is the inverted head and shoulders pattern this is a reversal pattern it shows up during a downtrend and constitutes of three bottoms whereas the lowest bottom which is located in the middle is called the head and is lower than the other two bottoms which are the shoulders and the left shoulder is lower than or equal to the right shoulder notice how the neckline connects the first price bounce top with the second bounce so how to trade this pattern you either enter right away as soon as the price breaks the neckline or you wait for the price to first break the neckline and then by once it retraces back to test the neckline the stop loss is placed below the head while the profit target is calculated based on the distance from the top of the head and the neckline so if that distance is 150 pips for example then your target is 150 pips above the neckline here is a live example on the chart for an inverted head and shoulder pattern on the us dollar against the japanese yen the price fell down sharply then has hit a strong support line and bounced from it then went back down lower and broke below the previous level but could not sustain the downside break out and made a strong bounce up where it has stayed up for some time before making a third attempt to break down but bounce back after briefly touching the left shoulder this is the nick line level and we only buy once the neckline is broken the price has finally broken the neckline and we enter a by trade from here and according to the pattern rule here is where we place the stop loss and profit target the profit target is hit if you have reached to this point in my video and you have any questions please post in the comment section also hit the like and subscribe to my channel next is the symmetrical triangle pattern this is a continuation pattern it forms either when the market is trending up or down and it usually displays a halt or a slowdown of the trend to catch its breath before continuing in the direction of the market trend moreover we should see the price slowing down and the longer the market stays in within this pattern the slower it gets all the way towards the tip of the triangle before it breaks out with the direction of the trend symmetrical triangle pattern constitutes two bands so how to trade this pattern enter as soon as the price breaks the resistance or support band in the direction of the market trend the stop loss is placed at the lowest point of the band when you buy or at the high point of the band when you sell the profit target is calculated based on the widest range at the beginning of the triangle you add that to the point from where the band was broken and that would be your target so if the range at the beginning of the pattern is 150 pips then the profit target level is calculated at 150 pips above the breakout level from the triangle band in an uptrend scenario and 150 pips below the breakout level of the triangle band in a downtrend scenario i will show two live scenarios for the symmetrical triangle pattern the first scenario is a buy pattern on the british pound against the us dollar and as you can see the price first had a strong uptrend movement then slowly started to retrace back down notice how the price action kept on getting tighter as it continues to go down this is the point in time when the symmetrical triangle pattern has become obvious so we draw the trend lines that highlight the pattern the stop loss is placed at the lowest point of the pattern while the profit target is calculated based on the distance between the lowest point of the pattern and the highest point which the price has reached after bouncing off the lowest point then we add that number starting from the breakout point of the upper band the by trade can either be executed from right at the breakout point which is the higher risk option or can be taken after the price has retested the upper band of the pattern which is the lower risk option since this trade is based on a continuation pattern the probability of success is relatively high the profit target for the by trade is hit the second live scenario is a sell pattern on the british pound against the us dollar the price was moving up in a strong uptrend then the market trend changed to a downtrend more importantly it has slowly began to form the symmetrical triangle pattern this is the point in time when the symmetrical triangle pattern has become obvious so we draw the trend lines that highlight the pattern how the price made two strong bounce backs from the lower band which adds a big validation to the lower band in simpler words it means that the majority of the market will be looking at the lower band as a turning point either the price will bounce up from it and continues to go up or the price will break it which activates the symmetrical triangle pattern and confirms that we are in a downtrend and in this case the price has activated the sell pattern nevertheless notice how the price action kept on getting tighter whenever it has attempted to test the upper band while the market has halted any attempt for the price to move up which further confirms that we are in fact in a downtrend the stop loss is placed at the highest point of the pattern while the profit target is calculated based on the distance between the highest point of the pattern and the lowest point which the price has reached after retracing back from the highest point the cell trade can either be executed right at the breakout point which is the higher risk option taken after the price has retested the upper band of the pattern which is the lower risk option again since this trade is based on a continuation pattern the probability of success is relatively high the profit target for the cell trade is hit next is the ascending and descending triangle patterns these are continuation patterns and both are exactly the same as the symmetrical triangle pattern the only difference is that the ascending and descending triangle breakout level is the horizontal line instead of the slightly tilted trend line in the symmetrical triangle however the entry point the stop loss and target rules are the same the ascending triangle is a buy only and shows up during an uptrend while the descending triangle is a cell only and shows up during a downtrend so how to trade this pattern for the ascending triangle we buy once the price breaks out the horizontal line the stop loss is placed at the lowest point of the triangle while the profit target is calculated based on the distance between the first bounce off the lower band and the horizontal line so if the distance is 150 pips then the profit target will be placed 150 pips above the horizontal line the descending triangle pattern on the other hand is also similar to the ascending pattern the only difference is the horizontal line in the descending triangle pattern the horizontal line is the support line while in the ascending pattern it's the resistance line nevertheless trades are only taken if the price breaks the horizontal line in the descending triangle the cell trade is executed once the price breaks out below the horizontal line while the stop loss is placed at the highest point of the triangle furthermore the profit target is calculated based on the distance between the first retrace off the upper band and the horizontal line so if the distance is 150 pips then the profit target will be placed at 150 pips below the horizontal line i will show live trades for both the descending and the ascending triangles here is a live example on the chart for the descending triangle pattern on the us dollar against the canadian dollar the price was pushing up in a strong uptrend then made a strong reversal which indicated a possible shift in the market to a downtrend that will be later confirmed through a very clear descending triangle pattern which the price will slowly begin to form as you can see the price made a strong bounce up after it hit a support level then bounced again from it while making lower highs indicating weakness in the market at this point the descending triangle pattern has become obvious and we draw the horizontal line and the upper band notice how the market slows down whenever it comes close to the upper band which further confirms the weakness in the market we sell from here once the price breaks the horizontal line the stop loss is placed at the top of the triangle while the profit target is calculated based on the distance between the first retrace off the upper band and the horizontal line the profit target for the descending triangle pattern is hit the second live scenario is for the ascending triangle which is a by trade on the euro against the japanese yen notice the strong uptrend movement the price pulled back once it hit a strong resistance then made its way back for a second test attempt while every time it pulls back from the resistance line it forms higher lows at this point the ascending triangle pattern has become obvious and we draw the horizontal line along with lower band of the triangle notice how the market slows down every time it comes near the lower band which indicates a strong uptrend the price broke for the horizontal line and we buy from here the stop loss is placed below the lowest point of the triangle while the profit target is calculated based on the distance between the first bounce off the lower band and the horizontal line the profit target for the by trade on the ascending triangle pattern is hit next is the boarding pattern this is a reversal pattern the shape of this pattern is also similar to the symmetrical triangle pattern with the side switched left to right so the tight range is at the beginning of the pattern instead of the end the pattern shows higher highs with the market inability to sustain the higher breakouts all while printing lower lows with each time it attempts to go up signaling a possible reversal in the market trend so how to trade this pattern enter once the price breaks out below the lower band with a stop loss at the highest point of the pattern and the profit target is the distance between the highest point and the lowest point of the boarding pattern so if that distance is 150 pips then your target is 150 pips from the broken point of the lower band the following is a live example for the boarding pattern on the us dollar against the japanese yen the market had a strong uptrend but the price became tight for a number of days then it made a new high and retraced back and again made a higher high and retraced back making a lower low this is when the boarding pattern has become obvious and we draw the upper band and the lower band again notice how the price was very tight at the beginning of the boarding pattern and became much more volatile towards the end of the boarding pattern and we sell from here at the break of the lower band we place the stop loss at the highest point of the boarding pattern and we calculate the distance between the highest point and the lowest point of the pattern and we apply that starting from the breaking point of the lower band the profit target is hit next is the rectangle pattern this is a continuation pattern nevertheless it forms when the market is in a clear trend and the price gets stuck between a strong resistance and a strong support horizontal lines so how to trade this pattern we only buy if the market trend is up and only sell when the market trend is down in other words we never go against the market trend because this is a continuation pattern in an uptrend we buy when the horizontal resistance breaks out while placing the stop loss below the bottom of the rectangle pattern while in a downtrend we sell when the horizontal support breaks out while placing a stop loss above the top of the rectangle pattern and the profit target is calculated based on the distance between the two horizontal lines so if the distance is 150 pips for example then the target will be set at 150 pips starting from the broken horizontal line here is a live example of the rectangle pattern on the us dollar against the swiss franc the overall trend of the market was down the price went down and hit a strong support level then bounced back until it found a strong resistance level it then remained stuck between these two levels for many months this is when the rectangle pattern has become obvious and we draw the upper and lower horizontal lines and since the market is in a downtrend we wait for a breakout of the lower band to sell the price has finally broken the lower band and we sell from here we place the stop loss above the upper band while the profit target is calculated based on the distance between the upper and lower horizontal lines and then we add that distance below the lower horizontal line and that would be our target the profit target is hit [Music] next is the flags and pennant pattern these are continuation patterns they look like small flags and usually appear during very strong up or down trends and once the market breaks out from these patterns which happens relatively fast the strong trend will resume please note that since these flag patterns take relatively less time to form they are a lot more risky to trade compared with the rest of the patterns in this video so how to trade this pattern enter once it breaks out in the direction of the market trend and to find your stop loss and target you will need to identify your flag stick which is the nearest strong level which the price has stopped at prior to launching a strong move to then form the flag pattern nevertheless your stop loss should be placed at the bottom of the stick in an uptrend and the top of the stick in a downtrend moreover your target should be the length of the flag stick add that number from the breakout point of the band in the direction of the trend and that would be your target it's very important to note that if the length of the stick is too big we should ignore this pattern because it becomes a lot more risky here are live examples of flags let's start with a flag pattern on the british pound against the u s dollar as you can see the market is in a very strong downtrend and then bounce up from a support line and went up and pulled back to briefly establish a higher low and this is the point when the flag pattern has become obvious and we draw the upper band and the lower band and then we add the stick to determine our stop loss and profit target value in this case the stick will connect the lowest point of the flag with the nearest resistance level on the chart the stop loss is placed at the top of the stick and the target will be the length of the stick added from the breakout point of the lower band and since this is a wedge pattern expect the breakout to happen very soon the price has broken the lower band and we sell from here the profit target is hit and here is another example of the pennant pattern won the us dollar against the swiss franc this time however although it looks like a great setup we should ignore it because the flag stick is too far away from the lower band and here is a valid example of the pennant pattern on the us dollar against the swiss franc the market had a strong buying momentum then slowly began to retrace back and this is when the pattern has become obvious and we draw the upper and lower bands of the pattern and here is the stick moreover we place the stop loss below the stick and the target profit will be the length of the stick which we will add to the breaking point of the upper band the price has finally broken the upper band and we buy from here or we wait for the price to retrace back and buy with a better risk to reward ratio the profit target is hit next is the rising wedge pattern this is a continuation pattern which forms during a downtrend market and offers an awesome risk to reward ratio compared with the other patterns it looks similar to the symmetrical triangle pattern but the difference is that the rising wedge pattern bands are tilted more upwards with the price printing higher highs and higher lows but keeps on getting tighter and slower the closer it gets towards the tip of the wedge which indicates buyers weakness so how to trade this pattern sell once the price breaks below the lower band with the stop loss placed above the highest point which the pattern has reached the profit target however is calculated based on the distance between the first bounce off the lower band and the first retrace from the upper band so if the distance is 150 pips for example then you calculate 150 pips below the breaking point of the lower band and that would be your target here is an example of the rising wage pattern on the british pound against the u s dollar the market was moving in a strong downtrend then started to go back up again during the process of the market correction the price kept on slowly rising up and kept on getting slower this is the point where the rising wedge pattern has become obvious and we draw the lower and upper bands notice how the upper band connects the price highs perfectly which means every time it has attempted to break out above the previous high it got rejected and kept trading within the pattern while the lower band is connected with the bottom level which the price has reached before the correction started although the price seems to have broken the lower band we must wait and see if the market will continue to trade below it the price has finally broken out from the lower band and we enter a sell trade from here and we place the stop loss above the highest price while the profit target is calculated based on the distance between first bounce off the lower band and the first retrace from the upper band and we add that distance starting from the breaking point of the lower band and that would be our profit target the profit target is hit next is the falling wedge pattern this is a continuation pattern it's the same as the rising wedge pattern the only difference is that it obviously applies during an uptrend market and comes with a nice risk to reward ratio it looks similar to the symmetrical triangle pattern but the difference is that the falling wedge pattern bands are tilted more downwards with the price printing lower lows and lower highs but keeps on getting tighter and slower the closer it gets towards the tip of the wedge which indicates sellers weakness so how to trade this pattern we buy once the price breaks above the upper band with the stop loss placed below the lowest point which the pattern has reached the target profit however is calculated based on the distance between the first retrace from the upper band and the first bounce off the lower band so if the distance is 150 pips for example then you calculate 150 pips above the breaking point of the upper band and that would be your profit target here is an example of the falling wedge pattern on the british pound against the u s dollar the market was trending up and the price started to fall down and has relentlessly tried to break up but kept on falling which signals market strength especially that it could not make lower lows at this point the falling wedge pattern has become obvious and we draw the lower and upper bands notice how the market has become very tight towards the tip of the wedge now we wait until the market break the upper band and we buy from there the market has finally broken above the upper band and we enter a by trade from here furthermore we place the stop loss below the lowest point of the pattern while the profit target is calculated based on first retrace off the upper band and the first bounce off the lower band so we add that distance starting from the breaking point from the upper band and that would be our target the profit target is hit if you have enjoyed this video and found it helpful please support my channel by hitting the like button subscribe and turn on the notification bill so you know when i release new content next is the rounding tops pattern this is a reversal pattern and it forms when the price goes up sharply then becomes relatively tighter as it slowly approaches a strong resistance line then trades in a tight range below the resistance for a while furthermore the price drops sharply afterward forming a round shaped top so how to trade this pattern you will have to wait for price to print more lower lows and lower highs and provide more sell signals to confirm a new downtrend before you sell otherwise if you sell right away you might end up selling from the lows this pattern is very useful because it tells you to temporarily stay out of a bullish market and also works great when you combine it with other technical signals here is an example of a rounding top pattern on the british pound against the u s dollar the rounding top pattern in this scenario has provided a lot of strength to the symmetrical triangle pattern which showed up afterwards giving us a strong combined cell signal once the price broke out from the symmetrical pattern lower band next is the rounding bottoms pattern this is a reversal pattern and it forms when the price goes down sharply then becomes tighter as it slowly approaches a strong support line then trades in a tight range above the support for a while and afterward the price rises up sharply forming a round shaped bottom so how to trade this pattern you will have to wait for price to print more higher highs and higher lows to confirm a new uptrend before you enter this pattern works great when you combine it with other technical signals just like the rounding top pattern the rounding bottom pattern is also very useful because it tells you to stay out of a bearish market nevertheless it also works great when you combine it with other technical signals here is an example of a rounding bottom pattern on the u s dollar against the canadian dollar in this scenario the round bottom pattern has provided a lot of strength to the broken trend line by signal giving us a strong combined buy signal once the price broke out from the downtrend next is the v top pattern it's a reversal pattern and forms when the price goes up sharply and once it reaches a strong resistance it immediately comes back down sharply so how to trade this pattern you will have to wait for market to print more lower lows and lower highs to confirm a new downtrend before you enter this pattern is very useful because it tells you to stay out of a bullish market and works great when combined with other technical signals here is an example of a v top pattern on the u s dollar against the canadian dollar the price moved up sharply then came back down sharply the v top pattern has added a lot of strength to the descending triangle pattern which showed up afterward and the two combined patterns have given a strong cell signal from the breakout of the descending triangle pattern horizontal line next is the v bottom pattern it's a reversal pattern and forms when the price goes down sharply and once it reaches a strong support line it immediately goes back up sharply so how to trade this pattern you will have to wait for market to print more higher highs and higher lows to confirm a new uptrend before you enter this pattern is very useful because it tells you to stay out of a bearish market and works great when combined with other technical signals here is an example of the v bottom pattern on the euro against the yen the price moved down sharply then came back up sharply the v bottom pattern has added a lot of strength to the broken resistance level by signal giving us a strong combined by signal once the price broke out from the strong resistance level if you have reached the end of the video congratulations now you know all the chart patterns and the way how you look at the price charts from now on will improve dramatically please keep in mind that the prices will rarely show a perfectly form pattern however we always look for price patterns that are as close as possible nevertheless you can apply the candlesticks patterns to go along with the chart patterns to improve the probability of success for the chart patterns which you decide to place your trades based on finally before you take the trade on a price pattern make sure that you back test the instrument which you found the pattern on which will help you find out how many times the pattern has been profitable in the past as some instruments respond to certain chart patterns better than others for example you will find that the ascending triangle pattern has been very successful on the japanese yen against the euro more than any other tradable instrument on the market for the past 30 years if you have any questions don't hesitate to comment and don't forget to like and subscribe to my channel thank you for your support and happy pips

2022-04-08 15:06

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