If you want to be a successful trader, it is important that you know how to trade forex using chart patterns. When you start using chart patterns to place a trade you may be able to save a lot of time and effort. This can help you concentrate on other aspects of trading and make profits.
You may be able to get an indication of where the foreign exchange market is headed next when you use chart patterns and other indicators for analysis. You need to understand that timing is crucial for success in this trade as most of the favourable market conditions are available only for a few moments.
If you do not make use of the favourable opportunities that are available in the market you may not be able to make regular returns on your investments. When you start understanding the different types of chart patterns you may be able to determine the best time for trading and this can help maximise your profits easily. You can also minimise the risks of trading as you become aware of when to avoid placing a trade.
Different types of forex chart patterns
The head and shoulders chart pattern is one of the most common patterns used by traders learning how to trade forex successfully. After an uptrend a topping pattern forms on the chart and similarly when there is a downtrend there is a bottoming formation.
In the topping pattern there is a price rise followed by retracement and then a higher price rise, and this is followed by retracement and then a low price. Similarly, in a bottoming pattern there is a low followed by retracement and then a lower level. This is followed by retracement and then a higher low. When the two highs and two lows are connected it completes the trend.
The other chart pattern that traders use when learning how to trade forex is known as triangles. These are usually used for short time frames. When the highs and lows of prices converge a triangle is formed and you may be able to determine the support and resistance levels.
Ichimoku cloud bounce is another popular chart pattern that is used by traders. In this chart the support and resistance levels are combined and this can help you predict when to place a trade. If the price pattern is above the cloud then the market condition is said to be bullish, and when it is below the cloud it is said to be bearish.
Choosing forex chart patterns
When you are learning how to trade forex it is important that you gain knowledge about the various tools that can help you choose the best time to place a trade. Chart patterns are often considered the ideal trading tool for determining the time to trade and make consistent profits. You can make use of the many online resources that are available to learn about trading in forex.