Oil Crumbles, Cable Reverses and the Dollar Continues with Bullish Structure. Bull Flag Break Opens Door for Continuation. Gold, USD Strong Inverse Correlation and in Confluence. FTSE Further Develops Range on Sharp Turn Lower. Trading price patterns are one of the best ways to trades because you have clear levels that either validate or invalidate the pattern.

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When the pattern is invalidated you need to adjust or exit your trade according. Clear trading rules build confidence. Price Patterns Give Very Clear Levels to Validate or Invalidate the Trade. When you look at the chart above, you can see a very clear entry and exit door for the both sides of the trade.

That point is made because you can see that GBPJPY obviously hits a level to the upside where buyers are stepping to the side or all together leaving the position and sellers take over until the bottom of the range is hit. As a forex trader, you simply need to focus on what price does near the range extremes or pattern support and resistance.

Support and Resistance is a fancy way of identifying a price floor or ceiling on the chart.

Naturally, a floor provides you support when you stand in a room and similarly provides support for price on the chart. If the floor was to give way under you, you would fall and price does the same when support gives way because anyone that was supporting the price by buying has likely left the trade.

There are many patterns for traders to be familiar with like triangles, rectangles, flags, and pennants. However, all of these patterns once recognized have very clear support and resistance that make up the price pattern and will also determine the trade direction you should be focusing on.

What You Need to Know When Trading Price Patterns

However, as great as it is, you need to have the price levels that validated or invalidate the pattern written dow n or easily accessible so you know how to act when price reacts around those levels.

Reward Set-Ups with Price Pattern Channels. The top of the channel is sitting at 0. You would want to take note of the top of the channel because one of two things can happen and you always want to be prepared.

Recognizing Forex Chart Patterns | OANDA

Of course, the pattern could continue to play out which means that you would do well to exit near 0. Conversely, you would want to take note of price action around 0. Trading is a game of managing risk better than the next trader.

Focus on improving your ability to recognize price patterns and knowing exactly where to exit your trade and you will improve your confidence and possibly your overall results.

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