Forex for a trader
W formation forex

W formation forexThis is the first pattern that I ever learned. It signals bullish action. What you're looking for is one candlestick that looks almost like a cross (these are called "doji"). If the stochastic is low, the RSI isn't too low (not less than 30) and volume (in the chart here there's no volume because volume doesn't function the same way in the forex market) is high, then you're on your way to forming a "W". What you want to look for next is a burst of strength to the upside; this will form your center point. Eventually you will use this as a confirmation. And you will need Surety Bonds. Watch for another pullback creating a higher low point. This candlestick will likely be shorter than the previous base, although this too could be a doji. Look for the stochastic to be oversold again, but not quite as low as before. As the chart shifts off the low look for an increase in the RSI that surpasses the previous reading. It's good if this continues going up--the stronger the better, until somewhat over 70 (then the chart may be getting top heavy). In any case, the "W" formation is confirmed as long as the RSI continues upward and the candlesticks pass the mid-point in the "W". In my experience, it tends to be a reliable indicator. Again, the more volume on the two bases and the stronger the RSI the better. PS: My links are nearly all cleaned up and the post labeling is done on all back posts! Something to be proud of =) I am developing my own resolutions chart (a la Happiness-Project) and have come up with several ideas to improve the blog. More later.

Ha, if I had only known this yesterday! Great educational post. I only clicked on one link yesterday - Fear and Greed Trader. That blog is really shaken up my thinking - its great. He trades a simple momentum strategy too, albeit with much larger priced equities, and ETFs, but I'm finding lots of parallels. BTW, in Windows Vista using Firefox, your blog has a large white space on the left, and your 2nd and 3rd columns are all crunched to the right. I love Fear and Greed Trader's site. It's probably the only trading blog site where I read all of the articles (linked on the bottom right side) the first day I came across them. I've noticed the site display problems, especially on wide screen monitors.

I'm trying to develop another layout, but it's coming along slowly =) In time, in time. Analyzing Chart Patterns: Double Top And Double Bottom. Double tops and bottoms are reversal patterns. A double top signals the price is no longer rallying, and that lower prices are potentially forthcoming. A double bottom indicates the price is no longer falling, and the price is heading higher. A double top forms when the price makes a high within an uptrend, and then pulls back. On the next rally the price peaks near the prior high, and then falls below the pullback low. It's called a double top because the price peaked in the same area twice, unable to move above that resistance area. The pattern is complete—traders may take short positions or exit long positions—when the price drops below the pullback low. For example, if the price hits a high of $50, pulls back to $47, rallies to $50.05, and then drops back below $47, the pattern is complete and that could indicate that the price will continue to drop. For trading purposes, short positions may be initiated when the pattern completes. It's also advisable to avoid longs, since the price could decline further. A stop loss on short positions is placed above the latest peak, or above a recent swing high within the pattern. The estimated decline is equal to the height of the pattern subtracted from the breakout point. If the pattern high is $50.05 and the pullback low is $47, when the price breaks below $47, subtract $3.05 from $47 to get a target of $43.95. The rationale for the double top pattern is that uptrends make higher swing highs and higher swing lows. Once the pattern completes the price failed to make a substantially higher swing high, and then proceeded to make a new low by dropping below the prior pullback low. This draws the uptrend into question, and there is evidence of a downtrend beginning. A double bottom forms when the price makes a low within a downtrend, and then pulls back to the upside.

On the next decline the price stalls near the prior low, then rallies above the pullback high. It's called a double bottom because the price stalled in the same area twice, unable to drop below that support area. The pattern is complete, and traders may take long positions, when the price rallies back above the pullback high. For example, if the price drops to $47, pulls back to $50, drops to $46.75, then a rally back above $50 signals that the price will continue to head higher. Patterns may cover a large price or time area, or they may be small, occurring quickly. The price target adjusts to the size of the pattern. Smaller patterns have smaller price targets than big patterns. The price target for the double bottom is similar to the double top, except with the double bottom we add the height of the pattern of the breakout point. If the height of the pattern is $3, add $3 to the breakout point. Trading Considerations. Not all traders are interested in taking positions on a chart pattern breakout. Even so, the double top (bottom) pattern still alerts traders when they may wish to reconsider their long (short) positions.

The price target is only an approximation of how far the price could move after a breakout. The price may not reach the target level, which is why a stop loss is used, or the price could fall well below the target. What the target does provide is a reward:risk ratio, and that is one of the shortcomings of this pattern. The price target and stop loss are based on the height of the pattern. This means the expected profit and risk are roughly the same. Typically, professional traders prefer trades where the profit potential is great than the risk. The reward:risk is improved if the stop loss is placed below the high of a topping pattern or above the low of a bottoming pattern, although this will still typically only result in a reward:risk of 1:1 to 2:1. Not all patterns are worth trading. The ones offering higher reward:risk are preferred. Even if a pattern isn't traded, it still provides valuable insight into the short-term direction of the price. Learn Forex: The 77 Year Old Chart Pattern That Traders Still Love. by Tyler Yell, CMT , Forex Trading Instructor. Position Trading based on technical set ups, Risk Management & Trader Psychology. Your Forecast Is Headed to Your Inbox. But don't just read our analysis - put it to the rest.

Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk. Your demo is preloaded with ?10,000 virtual funds , which you can use to trade over 10,000 live global markets. We'll email you login details shortly. You are subscribed to Tyler Yell. You can manage you subscriptions by following the link in the footer of each email you will receive. An error occurred submitting your form. Please try again later. Article Summary: A leading technical analyst of the 1930s created a method for trading that is still applicable today. Learn how to trade market turning points based on Fibonacci retracements and market psychology with the Gartley Pattern. Many traders ask how a trading method that is 77 years old is applicable today. When you combine timeless tools like Fibonacci Retracements with common traits of successful traders, it’s easy to see why this method is so popular.

If those aspects of a trading method appeal to you, it’s my pleasure to introduce you to the Gartley chart pattern. What is the Gartley Pattern? The Gartley pattern is a powerful and multi-rule based trade set-up that takes advantage of exhaustion in the market and provides great risk: reward ratios. The pattern is also known as the “Gartley 222” because the pattern originated from page 222 of H. M. Gartley’s book, Profits in the Stock Market that was published in 1935 and reportedly sold for $1,500 at the time. The Gartley pattern is based on major turning points or fractals in the market. This pattern plays on trend reversal exhaustion and can be applied to the time frame of your choosing. The other key that makes this pattern unique are the crucial Fibonacci retracements that come together to fulfill the plan. There is a bullis h long buying pattern and an equally powerful bearish short selling pattern. Much like you would find with a head and shoulders pattern you buy or sell based on the fulfillment of the set up. Learn Forex: Buy & Sell Gartley Chart Pattern. Here is a stripped down version of patterns so you can see what the look like without price and time on the chart.

The buy pattern will always look like an "M" with an elongated front let. The sell pattern will always look like a "W" with an elongated front leg. Gartley Strategy Tools. The three important tools to use on your chart when finding a Gartley are: Fractals - The important part about trading the Gartley pattern is that you will trace the pattern from turning points or swings in the market. One of the better indicators to trace swings is Fractals . Fractals show up as arrow above swings in price. Fibonacci Retracements – The Fibonacci retracements will make or break the patterns validity. Below are the specific retracements that make up the pattern. Fibonacci retracement lines are horizontal lines that display support or resistance in a move. Add Line Tool (Optional) – This tool will allow you to clearly draw connecting points like X to A, A to B, B to C, and C to D for easy measuring. Gartley Strategy Rules. Point B should retrace 0.618 from the XA move. Point D should retrace 0.786 from the XA move and create the entry zone.

Point D should be a 1.27 or 1.618 extension of the BC move Point C should retrace anywhere from 0.382 – 0.886 of the AB move. Buy or Sell at point D depending on whether the pattern is bullish or bearish Place stop either below the entry for the tightest or Risk: reward ratio or below Point X. If the market trades through Point X, the Gartley pattern is invalid and you should exit or not take the trade. When these rules are met, you can find yourself on the cusp of a trade at the Entry Zone. Recognizing these points in the market is truly like riding a bike. Once you get the hang of it, the levels will pop out on the chart to you. The EURNZD set up an ideal Bearish Gartley Pattern leading into the Reserve Bank of New Zealand Interest Rate Announcement. Learn Forex: EURNZD chart where Bearish Gartley played out. Another set up is forming on the EURJPY and has begun to play out. If you liked the set up, you could sell at Point D and place a stop above point X. Point X is the start of the pattern and is an extreme point on the chart. Learn Forex: EURJPY c hart w here Bearish Gartley is forming. Closing Tips on Us ing This Pattern. When trading the Gartley pattern, the pattern is meant to be traded at D only. If you believe a pattern is unfolding but we’re only at point B, be patient and hold off until we get to D. The power of the pattern comes from converging Fibonacci levels of all points from X to D and using the completed pattern for well-defined risk. Lastly, this can be traded on any time frame you prefer. The reason this method has a stable track record is that it is based on unusual market positions where most traders are afraid to enter. Take advantage of the risk: reward set up available and trade with proper trade size . This pattern occurs rather frequently. When you get comfortable with using Fibonacci retracements for support and resistance you'll find yourself looking for the points to complete a Gartley pattern.

It is very important to watch for the D point to be at 78.6% of the XA leg and to keep your stops rather tight in case the pattern is invalidated. ---Written by Tyler Yell, CMT Trading Instructor. Interested In Our Analyst's Best Views On Major Markets? Check Out Our Free Trading Guides Here. DailyFX provides forex news and technical analysis on the trends that influence the global currency markets. The Only 3 Forex Chart Patterns You Need to Know (and Why I Trade Them) There are a million ways to make money in the Forex market. The key to success in this business is not finding one that works, it’s finding one that works for you . While I started out in 2007 trading nothing but pin bars and inside bars, my “style” today is quite different. Put simply, the way I trade today is much more robust than it was in 2007. Today, I still trade pin bars and inside bars, however over the years I have expanded my trading plan to also include a few choice technical patterns.

Why trade these Forex chart patterns in addition to candlestick formations? Think of it like this. Before a developer begins building a mall, big-name shopping stores are signed on in order to provide the best experience possible to shoppers. These are called “anchor stores”. In a similar manner, the three chart patterns below can become the “anchors” to your trading plan. These are the formations that you can rely on to generate profits on a consistent basis. Exclusive Bonus: Download the Forex chart patterns PDF that will show you exactly how I trade the 3 chart patterns below. Of course they are not the only price structures out there, however, they are the ones that I have come to enjoy trading the most over the years. So without further ado, let’s get started! The Head and Shoulders (and Inverse) This is not only my favorite reversal pattern, but it is also my favorite pattern, period. That includes its inverse, which has similar mannerisms.

For those who have followed me for a while now, you may recall that my favorite pattern to trade used to be the wedge. However, the last year of trading has produced a new winner in my book. The head and shoulders is the least common of the three formations we will discuss today. While there may be similar price structures that occur more frequently, a valid and therefore tradable head and shoulders reversal doesn’t come around very often. Put simply, it works. But more than that, it can be quite easy to spot and extremely profitable when you know what to look for and how to trade it. The pattern can offer a precise entry given the fact that the neckline is generally based on several highs or lows. This fact alone takes a lot of the guesswork out of determining when the pattern has confirmed. Another huge benefit, like the other two technical formations below, is that we have a measured objective from which to identify a possible target. Staying out of Trouble. This is something that you may not know (unless of course you’re one of my members). In order to be considered valid, the two shoulders of the pattern must overlap at some point. Situations where the shoulders don’t overlap are most common when the pattern unfolds at a steep angle. While a break of the trend line (if one exists) may trigger a change in trend, it does not fit the criteria to be called, or traded as, a head and shoulders pattern.

Notice how no part of the first shoulder in the illustration above overlaps the second shoulder. This disqualifies the price structure from being traded as a head and shoulders pattern. Another common mistake among Forex traders is to use a measured objective as a “one-stop shop”. In other words, they simply measure out the distance in pips and then set a pending order to book profits at that level. While that may occasionally work out in your favor, a much better approach is to determine whether or not that objective lines up with a pre-existing key level. If it does, perfect, however a more common scenario is one where the market will come in contact with a key level prior to reaching the objective. If this is the case, you’re far better off taking profit at the key level rather than hoping for an extended move to the objective. Remember that technical analysis is not a perfect science and there are no guarantees, so there’s no sense to risk losing an unrealized gain of 500 pips in order to make an extra 50 pips in profit. Last but not least, the head and shoulders is best traded on the 4-hour chart or higher. However, I have found that the best price structures tend to form on the daily time frame. A formation on the 1-hour chart or lower should always be ignored, regardless of how well-defined the structure may be. As the name implies, the wedge is a technical pattern in which price moves into a narrowing formation, also called a triangle.

Unlike the head and shoulders we just discussed, the wedge is most often viewed as a continuation pattern. This means that once broken, price tends to move in the direction of the preceding trend. That said, it’s important not to get caught up in trying to predict a future direction while the pattern is still intact. Only once support or resistance is broken should you begin to identify possible targets. The wedge was one of the first Forex chart patterns I began trading shortly after I entered the market in 2007. By 2010, I had not only become proficient in trading them, but I had also developed the intuition necessary to identify the most profitable formations – something that can only be had after years of practice. The really great wedge patterns don’t come around all that often. By “really great”, I’m referring to the ones that form on the daily chart. While you can trade these on the 4-hour time frame, in my experience the most lucrative trade setups form on the daily time frame.

Wedges tend to play out relatively quickly compared to something like the head and shoulders pattern. However, they also allow for an advantageous risk to reward ratio, especially the larger structures that form on the daily chart. This combination allows you to secure a nice profit in a relatively short period of time. So although they don’t come around all that often, wedges should certainly be something that you watch for during extended periods of consolidation. Staying out of Trouble. There are three common mistakes I see traders making when it comes to trading the wedge. The first and perhaps most prevalent is trying to force support and resistance levels to fit. In fact, this is a common issue I see across all of trading, not just wedges. As I always say, if a level is not extremely obvious, it should be ignored. The three points in the illustration above are clearly not inline with the upper and lower levels of consolidation, which invalidates the formation in terms of “tradability”. The second mistake I see among traders is attempting to trade a wedge on a lower time frame. While these formations may occur more often, they won’t be nearly as reliable or effective as the price structures that form on the daily time frame. Last but not least is the issue of timing. As you may well know, timing is a key factor if you wish to succeed in the world of Forex. And when it comes to wedge patterns, timing is everything.

More often than not, when this pattern breaks, the market will retest the broken level as new support or resistance. This retest offers the perfect opportunity for an entry, however it does take patience to achieve. Be careful of entering on the first closed candle outside of the pattern as you will likely get a retrace of some sort. This will not only give you a more favorable entry, but it will also help you avoid making an emotional decision about exiting the position in the event you entered prematurely. The Bull and Bear Flag. The bull or bear flag is another name for a channel. However, by adding “bull” or “bear” to the designation, we’re giving it a directional bias. So as you might expect, it is most often traded as a continuation pattern. Like the head and shoulders, flags often form after an extended move up or down and represent a period of consolidation. It’s essentially an indecision point in the market, where the bulls and bears are battling to see who will win control. I feel confident in saying that you could literally trade nothing but bull and bear flags and make very good money in the Forex market. This, of course, assumes that you have become a proficient price action trader. Why do I think so? There are a few reasons, but mostly due to the fact that these formations occur quite often. This is true even if you are trading the higher time frames.

Of course when I say “quite often”, I’m referring to a few times per month, at most. That said, you only need one profitable trade each month to make good money as a Forex trader. If that one good trade comes in the form of a bullish or bearish flag pattern, it is likely to have an extremely favorable risk to reward ratio attached to it. This is another reason why I love having this price structure included in my trading plan. The measured objective in this case often allows for several hundred pips on most currency pairs. Combine that with a precise entry and a well-placed stop loss that is 50 to 100 pips away, and you have a recipe for a profit potential of 3R or better just about every time. Staying out of Trouble. Like the other patterns above, there are a few things you should watch out for when trading this formation. The first is perhaps the most obvious – never cut off the highs or lows in order to make the channel fit. If it isn’t obvious before you even draw the channel tool on your chart, it isn’t likely something you’ll want to trade. The illustration below shows price action that you would want to ignore completely. Notice how the two points above don’t match up with support and resistance. Calculating the measured objective also tends to give traders fits. Just remember that the measurement should include the consolidating price action. The correct measurement in the illustration above covers the entire “flag pole”, not just the price action leading up to the consolidation. Using chart patterns to trade the Forex market isn’t for everyone. However, if you enjoy using raw price action to identify opportunities, the three formations above would make a great addition to your trading plan.

You don’t have to know and trade every price structure available in order to make consistent gains as a Forex trader. Doing so will only slow the learning process and also send you chasing trades in every which direction. Becoming a successful trader is about finding an approach to the markets that fits your style, defining your trading plan and then refining those rules as you gain experience. So if you enjoy trading technical patterns, as I do, be sure to give some consideration to the three we just covered; they truly are all you need to become consistently profitable. Are you ready to start using the chart patterns above? If so, you definitely want to download the free Forex chart patterns PDF that I just created. It contains all three price structures you studied above and includes the characteristics I look for as well as entry rules and stop loss strategies. Click the link below and enter your email to get instant access to the cheat sheet. I’m a fan of these patterns too, thanks to your teaching. These three patterns are easy to spot, simple to trade and highly effective.

Kiwi, absolutely! They really are the only three patterns you need to become profitable. Hi Justin, thank you for your great and consistent work. Can this flag be valid? Doesn’t look to be, just confirming. Having read a previous post re: this pair and the h&s pattern that now seems to be realized, this q aims to define the invalidation point of the certain - appears to be - bullish flag. I wouldn’t call that a flag. The touches off of support and resistance aren’t very well defined. Awesome post Justin. What I like about these patterns is that once they form on the charts they are for the most part consistent and predictable. You’re not going to win 100% of the time with them, but as I said they are consistent and do perform well. My favorite one is the pennant. I love the way it bounces or rockets in its intended direction. It is a pattern that I myself is comfortable with and even teach it to my clients.

Stick with what works for you and you’ll get consistent results. I hope you all have a magnificent day on PURPOSE! Tareeq, you got it! There is no approach to trading that will work 100% of the time. It’s about finding something that fits your style, developing an edge that stacks the odds in your favor and always maintaining a favorable risk to reward ratio. It doesn’t happen overnight but it does work given the right amount of time, effort and patience. Real world trading looks very different to nicely drawn illustrations. Maybe if you offered trade examples from actual trading within a third-party verified account you could be taken seriously. The thing is this: my five year old niece does drawings similar to those in this article. But she’s no trader. I would’ve expected something different from a guy who calls himself a professional trader and who has ads in Forbes and Washington Post (that’s how I landed here). Hi JLTrader, perhaps you should have a look around the site before making such a drastic judgement call.

The reason I used these drawings in this lesson is simply because it’s easier to explain the patterns. If you want “real-world trading” examples, have a look at the following links: These are but a few of the real-world examples I publish every week. Have a good one. They work. Over 80% success on trades taken on these patterns. When people are buying signals they are buying tips on these patterns. It’s a shame considering that a five year old can trade these patterns and make money especially on longer (4H and greater-especially 1D time frames). Justin, I am regular reader of your blog, I want to know that the patterns you explained is only for forex or can be applied in any instrument like commodities or stocks. Anil, these patterns can be effective in any market so long as there is sufficient liquidity. Good job ! Thanks for the lesson. I’ll surely try them out. You’re welcome, Hendrix.

Let me know if you have any questions. I’m interested of this pattern of trading and I’m trying it, thank you for this nice and clear explanation. Thank you for this nice and clear explanation. Hi, Justin, Thank You for all done. It’s realy help me learn price action. Great work. Thank you very much….you make it easier for us. If the price action doesn’t retest the broken level, at how many pips would one consider the break not a fake? Great price pattern . Thanks for the lesson. Great price pattern. Thanks for the lesson. wow! good explanation. In your article, you said both Wedge and Flag are most viewed as “Continuation” pattern.

For what I have known, continuation or not should take the combination of 1)The trend type before the Wedge or Flag and 2) The formation type of Wedge or Flag into consideration. Say for example, if the previous trend is “up” and the flag is “ascending”, this flag pattern is most viewed as a “Reversal” pattern. Same applied to Wedge. If you agree with that , I will be very happy to see you updated this great article to make it more complete. Anyway, this is a great pattern article for beginners. Keep you good work! Thanks very much…I can’t waiting to get fantastic skills please help me to know forex trick..From East Africa (Tanzania) Disclaimer: Any Advice or information on this website is General Advice Only - It does not take into account your personal circumstances, please do not trade or invest based solely on this information. By Viewing any material or using the information within this site you agree that this is general education material and you will not hold any person or entity responsible for loss or damages resulting from the content or general advice provided here by Daily Price Action, its employees, directors or fellow members. Futures, options, and spot currency trading have large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets.

Don't trade with money you can't afford to lose. This website is neither a solicitation nor an offer to BuySell futures, spot forex, cfd's, options or other financial products. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed in any material on this website. The past performance of any trading system or methodology is not necessarily indicative of future results. High Risk Warning: Forex, Futures, and Options trading has large potential rewards, but also large potential risks. The high degree of leverage can work against you as well as for you. You must be aware of the risks of investing in forex, futures, and options and be willing to accept them in order to trade in these markets. Forex trading involves substantial risk of loss and is not suitable for all investors. Please do not trade with borrowed money or money you cannot afford to lose. Any opinions, news, research, analysis, prices, or other information contained on this website is provided as general market commentary and does not constitute investment advice. We will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from the use of or reliance on such information. Please remember that the past performance of any trading system or methodology is not necessarily indicative of future results. Copyright 2018 by Daily Price Action, LLC. Please log in again. The login page will open in a new window. After logging in you can close it and return to this page.

W Bottom and M Tops Strategy. Hello, traders. Welcome to the Price Action Course and the six-module Price Action Strategies. Well, in this lesson I’m going to teach you how to trade the W-bottoms and the M-tops methods to fade a move. Now, these methods are very strong on an intra-day basis, and up until now we are talking about strategies that work better on a higher time-frame. They do still work intra-day, on an intra-day basis but the W-bottoms and the M-tops are what works best when you’re trying to fade a move intra-day. And let’s say for example that you are just following a very strong down-movement and you’re trying to get in on that move. Well, you can find an M-top at the end of the corrected move or you can find a W-bottom at the end of the down-move at very strong either support, or resistance levels and then you will have a very strong immediate countertrend trading pattern or setup. Now, let’s go through what they look like and what they mean. Well, M-tops and W-bottoms are the most trusted intra-day trading techniques. Unlike double - or triple-tops and bottoms, M-tops and W-bottoms appear on a daily basis on the lower timeframe chart. This means that you don’t have to wait day in and day out for a double top to form. And if you are looking at a double top or a possible double top, for example, on the higher timeframes, it might take a week for it to form and it might not break at all. But with W-bottoms and M-tops, you are going to have very fast setups on an intra-day basis that are going to get you to your targets very fast. Remember that when we’re talking about price-action tradings, we always work with targets unless we are swing-trading this market, which we are not in this case. Now, this doesn’t mean that they aren’t good on a higher timeframe, countertrend trading patterns, because they are. What we aim to teach, is to use the setups on a daily basis on the lower timeframes or the one-hour and 15-minute charts. And, of course if you are scalping the markets you can use them on the five-minute charts, the one-minute charts, et cetera.

But these patterns, or any pattern at all, is very strong. Well, it’s not very strong on the very lower timeframes. If you are trying to scalp the market, well, that is a completely different animal, and you will learn it at scalping and day-trading course. The idea behind this strategy is that when price hits a level, it’ll test it twice and the second time will be the shallowest. In an auction, for example, buyers try to break with a level of resistance, only to be pushed back by sellers. If the second attempt to break is shallower and then the sellers take control of the market, rolling it over. So here’s the opportunity for you to capitalize on a fade. Now let’s go through an example of what this must look like and then we’re going to go to the charts and we’re going to look for the setups on the one-hour chart and the 15-minute chart may be on the EURGBP. Now here’s an example of a W-bottom. As you can see, price comes back while it’s going on a down move and these two black lines show us a very strong level of support and then price hits the level of support. Of course, we encounter the buyers that we weren’t supposed to encounter right here so price starts to fade back. Now, here’s what’s critical. Whenever price hits a level of support and it fades back, it doesn’t mean that we have shifted or the market has rolled over. This means that this zone where buyers were met, was also the zone where sellers were taking profit which means that, on top of the buying pressure, we have sellers giving up on this market and price is going to come up. Now when price comes up, a new batch of sellers is going to come into the market trying to push price to break with this area of support.

But then you can see that the second wave is shallower which means that we’ve failed to break this low, and we’ve failed to make a lower low, and thus buyers take control of the market and push the price up. And when we break with this high, which is the neck line, we have the setup for us to go long and in this case, if from the lowest points to the neckline, we have 27 pips, we are going to have a 27-pip target. And the same goes for an M-top. You can see that the price attempts to break with the level of resistance, then because of buyers taking profit and sellers coming into the market, price goes down. Then the second attempt to break above is shallower, giving us what could be an M-top and the pattern, or the setup, is complete once we break with the neckline and in this case we have a 32-pip highlow on the pattern, so our target is going to be 32 pips. Now, let’s go to the charts and let’s try to see this work in a live story chart. Okay, traders, so this is the EURGBP one-hour chart and as you can see right now we are at a very low of .7382. And the market is closed right now because it is Friday and the weekend has started. And what we’re going to do here is we’re going to try to find and spot W-patterns. Because we are in a down move, we are going to try to spot a W-bottom pattern. And the first one that I can spot is right here. Let me just thicken this chart for you as I always do because I like to have my charts visually attractive. Now, you can see that the first W-bottom pattern comes when this entire move starts to pause SP. And then we come to this low, right here, and then buyers push price up and then we make a higher low meaning that the second attempt to break with this low was not hard enough. So we have what seems to be a 28-pip W-bottom pattern. And, if you want, actually once you see the pattern, it looks like you can see that we have first of all, let me just put this on a black and very thick lines so you can see it. We have the first wave of the W-bottom pattern right here.

You can see that this is the actual move to the down side from this high. Then we have the second wave of the W-bottom pattern right here. And then we have the breakout when we break with this neckline. Now like we said before, this is not a countertrend trading strategy, but more of a fade strategy so we are just going to get 20 pips out of this move and as you can see, the very top of this candle gives us a 20-pip profit on a W-bottom pattern. And of course, if you are going to be trading this, you have to put your stops below this low. Which means that you are going to have what seems to be a nice 24-pip stop-loss on the W-bottom pattern. And remember that you are going to place your stops below the second wave of the W-pattern, because if price comes back and breaks with the second wave of the W-pattern, you have to get out immediately because the formation would now be invalid. And it’s very, very interesting to see that, you can see that, after the breakout price comes back and we have this huge candle that attempts to run with the stops of the traders that are playing this pattern. That’s why we are going to place our stops a few pips below the actual second swing of the pattern for us to be able to avoid these stop runs. This is basically what you are going to do whenever you have a W-bottom or a W-top pattern, you are going to calculate the height of the pattern. You are going to wait for the pattern to complete and to break and of course, you need the pattern to be formed at a very crucial level. And I didn’t show you which levels of support we were talking about before, because I wanted to show you that this pattern works. Okay, now I am going to show you the actual levels that we were working from.

And I’m going to use a horizontal line just to put a visual representation of the actual level of support and you can see that the W-pattern is working right at a strong level of support. And you can see that after we fade the move for 28-pips, price tried again to break it and finally did break it to the downside. So this is how you are going to be trading these patterns and you need to spot them. And of course if you are in an up move, you are going to do the same, but with the M-top. Am gonna put what i learned to work and buy your other courses with the money i make. Amazing! This is the basis for why retail traders keep losing money when trading lower timeframes. Eye Opening. Just finished this course. These videos are priceless. I just started trading and this course is most informative.

04072018. Eye Opening. Just finished this course. These videos are priceless. I just started trading and this course is most informative. 04072018. Forexia team, my ah ha moment. I've been watching your YouTube videos and joined your free FX courses. Your explanations are simple to understand for the most novice of investors and retail traders, I must say. You have helped my ERA recover from the crash of indicator based analysis ??. Retailers, I know you don't take free education as serious. But with this one, you won't go wrong. I sincerely believe it will help can help you transform your trading knowledge and understanding, as well as your life too in the near future.

All you need to do is to just visit Forexia. net and sign up for the free FX courses. @Forexianet thanks for sharing such contents at zero cost, God bless. Keep on doing what you do best, and one thing for sure. Dylan is a must have mentor for any retail trader?????????? The best. This was better than ANY paid course I have bought you r a true gentleman. FANTASTIC WORK. By: Khanyiso Khanyile. This is powerful information that is normally sold, easy to understand great explanations, this is the foundation course that i personally needed. Much love bro for your work God bless your efforts and knowledge.

Connected The Dots! When the student is ready, the teacher appears! Thank you, I am watching the videos over and over again. Awesome course. Jacob George. Awesome M and W Pattern Trading Course. Thanks for putting together the course Dylan! Mind blowing. Coupling this with what I have been taught recently has been a gamechanger! You're a brilliant teacher Dylan and a good person simply for making this course free haha. But you already knew that and knew it would pull us into wanting to know more! I'm going to apply your methods along with what I already know and hopefully I can come back for the advanced course! BEST 3 HOURS SPENT EVER and I mean that!

Thanks again man! TRADING MW. By: alix MANDER SAINT GILLES. THANK YOU THANK YOU THANK YOU. THANKS FOR THE FREE EDUCATION, IT'S ACTUALLY SUPERB. BECAUSE HE PROVES THAT. ANYONE WHO GETTING THIS FREE COURSE ARE LUCKY. EVEN FROM A PAID COURSE YOU CAN'T GET AN SUPER EXPLANATION LIKE HE DID ON THIS. THANK YOU VERY MUCH. 29052018. This is the only Forex course that should be avaiable believe it or not i had profit with this strategy the same day i watched it . Interesting. Great analysis made simple. thank you. great MM pattern course.

great course now i know that the plan of the market maker is to induce trader to take position in a wrong direction by forming macro MW thank you for that. Not bad, at all. I have been searching you for some time, considering how much shait on the web, but we all have to go thru that to gain experience. You have the best course I have ever seen you truly are a master, I tip my hat to you good sir. Fun fact Your tactics can be easily translated to Binary just with this free course. The Best ever. This is the best course I have ever received thanks a lots . Mind opener. I started with the beginner's course you offered online and i was mind blown, this course opens my eyes wider. Dylan is a mentor you must have. It's a must. Fantastic.

Thanks Dylan for making this free. I learnt a lot from this course, things I have never heard before. Now I see the charts differently and my trading results has significantly improved. Thanks once again. Thanks Forexia! The charts are finally making sense to me now. Amazimg course. Never ever learn like this befor This is the best knowladge about market. forex made symbol. Thank you Dylan for such a great course.

This is all I need. Forex in a nutshell. Thanks to these videos, I finally began making profits!! Thank you Dylan!! PRICELESS. Appreciate You Taking Time To Create This Course Which Is Absolutely Priceless - A Solid Foundation To Build Upon - Solid Deconstruction Of Price Action Without All The BS That Is Going On In Forex - Nice Work & Huge Thanx. Another awesome vid. Here are a series of courses that offers to not only show you how the markets work but actually gives you a strategy that works. The teacher is called Dylan and he actually teaches you something that is workable and proven because he walks his talk. His teaching style is so accessible with gentle humour to drive home the message: No more indicators, no more confusion and no more retail trader traps, just a better understanding of what you need to do to make those pips. I already have the pro course which I have to say is amazing for the amount of time and effort that obviously was put into it but these free courses are awesome! Great MW Course ?? I appreciate you for creating this course, this has truly opened my eyes to seeing how the market makers really work. Now I see nothing but M's and W's on my charts thanks to you. ?? Amazing course, made so simple that practically any trader start to apply.

Thanks Dylan, I had already purchased the advanced forex course but I have to say this M&W course was a great refresher. Similar to the advanced forex course, this stuff is not being taught anywhere else in the level of detail you go through and the simplicity that practically anybody can start to apply this. These patterns are so so powerful when understood. I really enjoyed going through this. Thanks a mill for putting this together. Excelent job. By: Iker Rios Salcedo. A really great course Dylan! Eye opener, enjoyable, understandable, very well structured. It makes MW strategy simple. Thank you! The ''M'' And ''W'' Trading Pattern.

The ''M'' and ''W'' trading pattern is a great little pattern that occurs with enough frequency for you to add it to your trading tool bag. It is very similar to a triple top or triple bottom - but unlike the triple top or bottom we are trying to enter the market on the bottom of the leg on the ''M'' pattern and the top of the leg on the ''W'' pattern. Normally with triple tops or bottoms you are looking to enter on a break of the neckline line or a pullback to the neckline once the neckline has been breached. With the ''W'' ''M'' pattern we will be limiting our risk to a minimal by entering on the bottom of the right leg for the ''M'' pattern and the top of the right leg for the ''W'' pattern. Take a look at the first two charts. This is what the pattern looks like before we start drawing in the lines. Next, for the ''M'' pattern - start with the left leg and draw to the top of the left shoulder. From the top of the left shoulder draw down to the middle leg and from there draw up to the top of the right shoulder. From the top of the right shoulder draw down to the bottom of the right leg. Only once the pattern has all the components of the letter ''M'' do you have the set up. Once the ''M'' is nearing completion we are looking for an entry at or very near to the bottom of the right leg. You can see I have drawn a trend line connecting the bottom of the left leg and the middle leg. Our entry will be as the market approaches this trend line. You want to enter the market on this trend line with a stop loss order just below the line. This gives you a minimal risk entry. If it turns out not to be an ''M'' pattern then your loss will be minimal. If on the other hand you do get an entry , your first target is the top of the right shoulder of the ''M''. Because the distance between the bottom of the right leg and the top of the right shoulder can be a small range you might want to look for this on larger time frame e. g. 4 hours and up. For the ''W'' pattern we are going to reveres the procedure. First draw the left leg down to the bottom of the left shoulder. From there draw a line from the bottom left hand shoulder to the top of the middle leg. From there you draw a line down to the bottom of the right hand shoulder.

The last stage is to draw a line to the top of the right hand leg. As with the ''M'', the ''W'' formation is not complete until all the components of the ''W'' are in place. Once in place you can draw a trend line across the tops of the ''W'' left hand leg across the middle leg and this is your entry point. A stop is placed just above the trend line to minimize risk with a target of the bottom of the right shoulder. Now, this pattern does pop up frequently on 5 and 1 minute charts but there is not enough room to make a profit on the length of the leg. But, what you can do however is be aware of the fact that an ''M'' pattern often signifies the bottom of the move and the market is getting ready to move Up. This also applies to the ''W'' pattern. When you see a ''W'' pattern the market is often topping out and getting ready for a move down. You can also monitor what happens at the top of the right shoulder on the ''M'' pattern and the bottom of the right shoulder on the ''W'' pattern once you are in the trade. If the move looks strong there is no need to exit. You could measure the distance between the top and bottom of the right leg and project that forward to give you a larger target. This in effect gives you twice the length of the right leg as a target. At the very least you should keep an eye out for this pattern as it is very good at identifying the fact that a bigger move is just around the corner. Best Regards Mark McRae. Information, charts or examples contained in this lesson are for illustration and educational purposes only. It should not be considered as advice or a recommendation to buy or sell any security or financial instrument. We do not and cannot offer investment advice. For further information please read our disclaimer.

To PRINT or save a copy of this lesson in PDF format simply click the PRINT link. This will open the lesson in a PDF format which, you can then PRINT. If you are unfamiliar with PDF or don't have a FREE copy of Arobat Reader see instructions. 1) Copy the Indicator file into C:Program FilesYourBrokerFolderMQL4 Indicators. Introduction to the Pattern. Find out on Indonesian Forum here provided by cevsmile Market leaves a structure price behing itself. A repetitive structure price is also called " Pattern " and it can be a very strong signal of imminent trend such as Head & Shoulder, Harmonics . My Pattern is like a subliminal m essage left on your chart chart. Keep in mind that if there is no major reason (fundamental) to keep market under pressure, then market rises, especially after a " M " . The opposite Pattern looks like a " W " M Pattern is a Double Bottom drawn by a specific structure price It can be a Tripple Bottom when Center Point is confused into Support W Pattern is a Double Top drawn by a specific structure price It can be a Tripple Top when Center Point is confused into Resistance. 1) The " M Pattern" rules: Right Shoulder higher than Left Shoulder ( Perfect Pattern ) Center Point is above left & right base Left & right base must be on the same support level. => Center Point is a key level to watch to confirm or not the continuation of the trend. 2) How to set SL & TP? SL is set just below the left base. TP is equal to right shoulder from left base and set from right Shoulder. So. SL = 45 pips TP = 369 pips RiskReward = 18. The Only 3 Forex Chart Patterns You Need to Know (and Why I Trade Them) There are a million ways to make money in the Forex market. The key to success in this business is not finding one that works, it’s finding one that works for you . While I started out in 2007 trading nothing but pin bars and inside bars, my “style” today is quite different.

Put simply, the way I trade today is much more robust than it was in 2007. Today, I still trade pin bars and inside bars, however over the years I have expanded my trading plan to also include a few choice technical patterns. Why trade these Forex chart patterns in addition to candlestick formations? Think of it like this. Before a developer begins building a mall, big-name shopping stores are signed on in order to provide the best experience possible to shoppers. These are called “anchor stores”. In a similar manner, the three chart patterns below can become the “anchors” to your trading plan. These are the formations that you can rely on to generate profits on a consistent basis. Exclusive Bonus: Download the Forex chart patterns PDF that will show you exactly how I trade the 3 chart patterns below. Of course they are not the only price structures out there, however, they are the ones that I have come to enjoy trading the most over the years. So without further ado, let’s get started! The Head and Shoulders (and Inverse) This is not only my favorite reversal pattern, but it is also my favorite pattern, period.

That includes its inverse, which has similar mannerisms. For those who have followed me for a while now, you may recall that my favorite pattern to trade used to be the wedge. However, the last year of trading has produced a new winner in my book. The head and shoulders is the least common of the three formations we will discuss today. While there may be similar price structures that occur more frequently, a valid and therefore tradable head and shoulders reversal doesn’t come around very often. Put simply, it works. But more than that, it can be quite easy to spot and extremely profitable when you know what to look for and how to trade it. The pattern can offer a precise entry given the fact that the neckline is generally based on several highs or lows. This fact alone takes a lot of the guesswork out of determining when the pattern has confirmed. Another huge benefit, like the other two technical formations below, is that we have a measured objective from which to identify a possible target. Staying out of Trouble. This is something that you may not know (unless of course you’re one of my members). In order to be considered valid, the two shoulders of the pattern must overlap at some point.

Situations where the shoulders don’t overlap are most common when the pattern unfolds at a steep angle. While a break of the trend line (if one exists) may trigger a change in trend, it does not fit the criteria to be called, or traded as, a head and shoulders pattern. Notice how no part of the first shoulder in the illustration above overlaps the second shoulder. This disqualifies the price structure from being traded as a head and shoulders pattern. Another common mistake among Forex traders is to use a measured objective as a “one-stop shop”. In other words, they simply measure out the distance in pips and then set a pending order to book profits at that level. While that may occasionally work out in your favor, a much better approach is to determine whether or not that objective lines up with a pre-existing key level. If it does, perfect, however a more common scenario is one where the market will come in contact with a key level prior to reaching the objective. If this is the case, you’re far better off taking profit at the key level rather than hoping for an extended move to the objective. Remember that technical analysis is not a perfect science and there are no guarantees, so there’s no sense to risk losing an unrealized gain of 500 pips in order to make an extra 50 pips in profit. Last but not least, the head and shoulders is best traded on the 4-hour chart or higher. However, I have found that the best price structures tend to form on the daily time frame. A formation on the 1-hour chart or lower should always be ignored, regardless of how well-defined the structure may be. As the name implies, the wedge is a technical pattern in which price moves into a narrowing formation, also called a triangle. Unlike the head and shoulders we just discussed, the wedge is most often viewed as a continuation pattern. This means that once broken, price tends to move in the direction of the preceding trend.

That said, it’s important not to get caught up in trying to predict a future direction while the pattern is still intact. Only once support or resistance is broken should you begin to identify possible targets. The wedge was one of the first Forex chart patterns I began trading shortly after I entered the market in 2007. By 2010, I had not only become proficient in trading them, but I had also developed the intuition necessary to identify the most profitable formations – something that can only be had after years of practice. The really great wedge patterns don’t come around all that often. By “really great”, I’m referring to the ones that form on the daily chart. While you can trade these on the 4-hour time frame, in my experience the most lucrative trade setups form on the daily time frame. Wedges tend to play out relatively quickly compared to something like the head and shoulders pattern. However, they also allow for an advantageous risk to reward ratio, especially the larger structures that form on the daily chart. This combination allows you to secure a nice profit in a relatively short period of time. So although they don’t come around all that often, wedges should certainly be something that you watch for during extended periods of consolidation. Staying out of Trouble. There are three common mistakes I see traders making when it comes to trading the wedge. The first and perhaps most prevalent is trying to force support and resistance levels to fit. In fact, this is a common issue I see across all of trading, not just wedges. As I always say, if a level is not extremely obvious, it should be ignored.

The three points in the illustration above are clearly not inline with the upper and lower levels of consolidation, which invalidates the formation in terms of “tradability”. The second mistake I see among traders is attempting to trade a wedge on a lower time frame. While these formations may occur more often, they won’t be nearly as reliable or effective as the price structures that form on the daily time frame. Last but not least is the issue of timing. As you may well know, timing is a key factor if you wish to succeed in the world of Forex. And when it comes to wedge patterns, timing is everything. More often than not, when this pattern breaks, the market will retest the broken level as new support or resistance. This retest offers the perfect opportunity for an entry, however it does take patience to achieve. Be careful of entering on the first closed candle outside of the pattern as you will likely get a retrace of some sort. This will not only give you a more favorable entry, but it will also help you avoid making an emotional decision about exiting the position in the event you entered prematurely. The Bull and Bear Flag. The bull or bear flag is another name for a channel.

However, by adding “bull” or “bear” to the designation, we’re giving it a directional bias. So as you might expect, it is most often traded as a continuation pattern. Like the head and shoulders, flags often form after an extended move up or down and represent a period of consolidation. It’s essentially an indecision point in the market, where the bulls and bears are battling to see who will win control. I feel confident in saying that you could literally trade nothing but bull and bear flags and make very good money in the Forex market. This, of course, assumes that you have become a proficient price action trader. Why do I think so? There are a few reasons, but mostly due to the fact that these formations occur quite often. This is true even if you are trading the higher time frames. Of course when I say “quite often”, I’m referring to a few times per month, at most. That said, you only need one profitable trade each month to make good money as a Forex trader. If that one good trade comes in the form of a bullish or bearish flag pattern, it is likely to have an extremely favorable risk to reward ratio attached to it. This is another reason why I love having this price structure included in my trading plan.

The measured objective in this case often allows for several hundred pips on most currency pairs. Combine that with a precise entry and a well-placed stop loss that is 50 to 100 pips away, and you have a recipe for a profit potential of 3R or better just about every time. Staying out of Trouble. Like the other patterns above, there are a few things you should watch out for when trading this formation. The first is perhaps the most obvious – never cut off the highs or lows in order to make the channel fit. If it isn’t obvious before you even draw the channel tool on your chart, it isn’t likely something you’ll want to trade. The illustration below shows price action that you would want to ignore completely. Notice how the two points above don’t match up with support and resistance. Calculating the measured objective also tends to give traders fits. Just remember that the measurement should include the consolidating price action. The correct measurement in the illustration above covers the entire “flag pole”, not just the price action leading up to the consolidation.

Using chart patterns to trade the Forex market isn’t for everyone. However, if you enjoy using raw price action to identify opportunities, the three formations above would make a great addition to your trading plan. You don’t have to know and trade every price structure available in order to make consistent gains as a Forex trader. Doing so will only slow the learning process and also send you chasing trades in every which direction. Becoming a successful trader is about finding an approach to the markets that fits your style, defining your trading plan and then refining those rules as you gain experience. So if you enjoy trading technical patterns, as I do, be sure to give some consideration to the three we just covered; they truly are all you need to become consistently profitable. Are you ready to start using the chart patterns above? If so, you definitely want to download the free Forex chart patterns PDF that I just created. It contains all three price structures you studied above and includes the characteristics I look for as well as entry rules and stop loss strategies.

Click the link below and enter your email to get instant access to the cheat sheet. I’m a fan of these patterns too, thanks to your teaching. These three patterns are easy to spot, simple to trade and highly effective. Kiwi, absolutely! They really are the only three patterns you need to become profitable. Hi Justin, thank you for your great and consistent work. Can this flag be valid? Doesn’t look to be, just confirming. Having read a previous post re: this pair and the h&s pattern that now seems to be realized, this q aims to define the invalidation point of the certain - appears to be - bullish flag. I wouldn’t call that a flag.

The touches off of support and resistance aren’t very well defined. Awesome post Justin. What I like about these patterns is that once they form on the charts they are for the most part consistent and predictable. You’re not going to win 100% of the time with them, but as I said they are consistent and do perform well. My favorite one is the pennant. I love the way it bounces or rockets in its intended direction. It is a pattern that I myself is comfortable with and even teach it to my clients. Stick with what works for you and you’ll get consistent results. I hope you all have a magnificent day on PURPOSE! Tareeq, you got it! There is no approach to trading that will work 100% of the time. It’s about finding something that fits your style, developing an edge that stacks the odds in your favor and always maintaining a favorable risk to reward ratio. It doesn’t happen overnight but it does work given the right amount of time, effort and patience.

Real world trading looks very different to nicely drawn illustrations. Maybe if you offered trade examples from actual trading within a third-party verified account you could be taken seriously. The thing is this: my five year old niece does drawings similar to those in this article. But she’s no trader. I would’ve expected something different from a guy who calls himself a professional trader and who has ads in Forbes and Washington Post (that’s how I landed here). Hi JLTrader, perhaps you should have a look around the site before making such a drastic judgement call. The reason I used these drawings in this lesson is simply because it’s easier to explain the patterns. If you want “real-world trading” examples, have a look at the following links: These are but a few of the real-world examples I publish every week. Have a good one. They work. Over 80% success on trades taken on these patterns. When people are buying signals they are buying tips on these patterns. It’s a shame considering that a five year old can trade these patterns and make money especially on longer (4H and greater-especially 1D time frames). Justin, I am regular reader of your blog, I want to know that the patterns you explained is only for forex or can be applied in any instrument like commodities or stocks. Anil, these patterns can be effective in any market so long as there is sufficient liquidity. Good job ! Thanks for the lesson.

I’ll surely try them out. You’re welcome, Hendrix. Let me know if you have any questions. I’m interested of this pattern of trading and I’m trying it, thank you for this nice and clear explanation. Thank you for this nice and clear explanation. Hi, Justin, Thank You for all done. It’s realy help me learn price action. Great work. Thank you very much….you make it easier for us. If the price action doesn’t retest the broken level, at how many pips would one consider the break not a fake? Great price pattern . Thanks for the lesson.

Great price pattern. Thanks for the lesson. wow! good explanation. In your article, you said both Wedge and Flag are most viewed as “Continuation” pattern. For what I have known, continuation or not should take the combination of 1)The trend type before the Wedge or Flag and 2) The formation type of Wedge or Flag into consideration. Say for example, if the previous trend is “up” and the flag is “ascending”, this flag pattern is most viewed as a “Reversal” pattern. Same applied to Wedge. If you agree with that , I will be very happy to see you updated this great article to make it more complete. Anyway, this is a great pattern article for beginners.

Keep you good work! Thanks very much…I can’t waiting to get fantastic skills please help me to know forex trick..From East Africa (Tanzania) Disclaimer: Any Advice or information on this web



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