There are some traders who think that if you use technical indicators then you do not have to learn about forex charts and their patterns. While some traders find this to be true it is best that you know about the patterns you should look for. Relying solely on the indicators can work, but having the back up of knowing patterns is important.
What Are Forex Charts Patterns?
The forex market works in cycles and patterns. There are certain actions will bring about a set reaction on the market. When these actions take place forex charts patterns are formed. There are a lot of different patterns that you can look for. Of course, there are times when the pattern will be easier to find than at other times. At these difficult times many traders turn to their indicators instead.
There are some common patterns that you should know about like the head and shoulder or the double top. There are also some simple patterns that you can look for like the engulfing candles and the falling three method. When you know about these patterns you can identify them and trade according to what they are telling you.
What Patterns Tell You
When you look at patterns you have to know what they are telling you. There are two things that patterns can tell you and they are that the trend will reverse or that the trend will continue. Most patterns will fall into the reversal section, but you have to verify this.
What Chart You Use
Patterns are related to the forex charts that you are using. If you look at a dot chart then you have to look for different patterns than when you look at a candlestick chart. The most commonly used forex chart is the candlestick. As this is the most commonly used it is also the one that most patterns are related to.
It is important that you consider the timeframe of the chart you are working on as well. If you are looking at the minute chart then the impact of the pattern will be different to when you look at the hour chart. The long-term effect of the pattern varies depending on the chart timeframe. The longer the timeframe of the chart the longer the pattern impact will be.
Using Patterns and Indicators
There are a lot of traders who feel that you should be using patterns or indicators and not both. The truth is that there are traders who use both of these analysis techniques. Of course, they will use the pattern for different times to the indicators. With a pattern you will not be able to determine the exact entry and exit points. This is what you should be using the indicators for.
Of course, it is possible to use only pattern or only indicators. This is a personal choice that all traders have to make. When you make this choice you have to consider what the impact will be on your trading. If you choose only patterns then you may not be able to use the trading strategy you want. However, if you use on indicators you may miss opportunities that the indicator does not pick up.
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