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Wednesday, 24 October 2018

Trading Strategies for Predicting the Most Accurate Movement Direction with Price Patterns [Forex and Binary Options]

How to analyze / predict forex and binary options best and accurately using Price Pattern

Every beginner and senior trader is sure to look for the best and most accurate way of predicting or analyzing trading to always profit. One in learning trading (Forex and Binary) for beginners is learning and knowing the current and future price patterns in a market movement trading.

By being able to recognize the emerging price pattern, it is very helpful in predicting or analyzing the trends that will occur, so that's where we use it as a moment to open trading positions.



One of the techniques of trading analysis is the price pattern or what is called in the cool language Price Pattern. On this occasion we will discuss it.

What is the Price Pattern?


Price Pattern is a pattern that occurs from a price direction movement, which consciously or not this price pattern always repeats. From time to time price movements always form a certain pattern that can be repeated again the next time.

If we can find out the direction that will occur, of course, the open trading position that we choose will be profitable. Even though it is not 100% it will always be right, because basically there is no analysis technique that can guarantee 100% accurate, even senior traders.

In a price movement in the market there are only two types of Price pattern that is reversal and continuation. Well, ... if it does not reverse direction, of course it will continue the previous direction. This is the key to trading whether it's forex or binary.

Price patterns or Price Patterns have 2 types, namely:


  • Reversal That is a price that forms a pattern that indicates a trend reversal.
  • Continuation That is a price that forms a pattern that suggests that price movements will tend to continue the direction of the previous trend.

REVERSAL PRICE PATTERN


In the reversal price pattern there are 3 types of patterns that indicate a change in trend, namely:

1. Double Top and Double Bottom
Before starting further we need to know we will mention:
  1. Peak as Top
  2. Valley as Bottom
  3. Trend up as Uptrend or Bullish
  4. Trend down as Downtrend or Bearish

Double Top looks like two twin peaks (side by side) and Double Bottom looks like two twin valleys (side by side). It's easy to recognize these two patterns. Both of these patterns also have high accuracy potential.

Double Top

The double top pattern usually occurs or appears when an uptrend will change to a downtrend. It can be said that this pattern appears at the end of the uptrend. I illustrate the picture below:



The movement is marked with 6 points as shown
The double top pattern has the potential to form if the price has moved down from point 3
When point 4 is successfully penetrated, it means that the double top pattern is successfully formed (confirmed)

  • With the formation of a double top means that the 'base line' is also successfully penetrated. And the next movement can be ascertained to be reversed or potentially bearish.
  • The possible bearish distance is as far as the peak level to the base. For example, if the distance between the peak level to base 50 pips, then the potential price will drop after the base is penetrated as far as 50 pips (from base to below 50 pips).

There is a time for a double top pattern when pull back occurs. Usually pull back will occur when the price movement has been 'halfway' 'towards the target. Example: if if the movement target is 100 pips, then if there is a pullback, when the price has fallen around 50-60 pips after the base is penetrated.



The double top pattern is said to fail if the pull back that goes too far can penetrate the base line. Like the picture below:



Double Bottom

In short, it is the opposite of the double top. And the double bottom pattern usually occurs at the end of the downtrend and suggests a bullish occurrence.


When the base line is broken and the double bottom pattern has been successfully formed (confirmed), there is a high potential for bullish.

The way to predict exactly the same as the double top is just the direction up.
The double bottom pattern is said to fail if the excessive pull back goes through the base line and goes down.

2. Triple Top and Triple Bottom

Triple Top and Triple Bottom are basically not much different from double top and double bottom. The difference is
  • if the double top and double bottom have 2 peaks or 2 valleys
  • If the triple top and triple bottom have 3 peaks or 3 valleys
To facilitate understanding, we pay attention to the picture:



Based on the picture above, the possibility of a Pul back starting from point 7 leads to the Base line.
Keep in mind the occurrence of pull back like this even though quite often but not always happens.
If the base is penetrated because the pull back is confirmed the pattern failed or failed.

Please note: the three peak points (on the triple top) and the three valleys (on the tiple bottom) are not always at the same level (straight).

  3.Head and Shoulders & Inverse Head and Shoulders

  Both of these patterns are also quite popular because they have a high level of accuracy, called Head and shoulders because if they look at the shape of the pattern like head and shoulders.

Head and Shoulders
  
Sometimes this pattern is often mistaken as a triple top, but there are several important factors that distinguish this pattern from a triple top. Now we see the picture below:



  • This pattern is called head and shoulders if it appears at the end of an uptrend
  • If in the triple top point 1, 2 3, tends to be level, but in the head and shoulders the midpoint or point 3 is higher than point 1 and point 5.
  • The cusp (3) is called the head
  • Point 1 and point 5 are called shoulders
  • This pattern is confirmed if the "neckline" line has been broken (point 6) and price movements tend to move down as far as the distance from the top to the "neckline" line (see the red arrow in the picture above)
  •  Sometimes pull back occurs (not always) moves up (point 7) again towards the neckline line, if after hit the neckline the price movement bounces down then this pattern is said to be perfectly formed
  • If a pull back occurs through the bablas neck line line above, then this pattern is considered a failure.

Inverse Head and Shoulders

This pattern is the opposite of the head and shoulders. This pattern usually occurs at the end of the downtrend. For how to confirm it is exactly the same as the head and shoulders pattern.

  • If this pattern has been confirmed then the price will move up as far as the distance from the bottom to the neckline line.
  •   If a pull back occurs through the neckline line and continues down, it means that this pattern is considered a failure.

CONTINUATION PRICE PATTERN

Continuation price pattern is a price pattern that is formed which indicates price movements will and still continues the direction of the current and previous trends. Or in other words this pattern indicates the trend will continue.

Price pattern continuation is grouped into 5, namely:
  • Triangle
  • Flag and Pennant
  • Wedge Formation and Rectangle Formation
  • Continuation Head and Shoulders Pattern
  • Supply and Demand Concepts
  • Alright, let's discuss one by one:

1. Triangle

Triangle or in Indonesian means triangle. This pattern is formed because the market moves sideways and the pressure between buyers and sellers is balanced, which ultimately graphs the price movement conical and forms like a triangle.

The triangle pattern is divided into 3 types, namely:
  • Symmetrical triangle
  • Ascending triangle
  • Descending triangle

Let us be more clear and understand, we just discuss one by one:

1. Symmetrical triangle

Symmetrical triangle is a triangular pattern that has a support line (lowest level) and resistance (highest level) which is tilted (converging) opposite to one point. Even though it is called symmetrical or symmetrical, but in reality this pattern is not always symmetrical. Note the illustration below :

From the picture above we can see this pattern formed when the market rallies then sideways or consolidation. Symmetrical triangle at Uptrend:

  • The symmetrical triangle pattern does not have to have a four point reversal point, which consists of two peaks and two valleys. 6.
  • Confirmation of this pattern is indicated by the upper line break
  • If this pattern has been confirmed then the price will move up again.
  •  The way to predict the target is by referring to the distance from point A to point 1, if the distance from point A to point 1 is 100 pips then the next movement after penetrating the Upperline is around 100 pips
  • As usual, every pattern has a possibility of a pullback (the example above at point 7), if the pullback move down does not penetrate the Upperline and bounce it means this pattern is still valid.
  • If an excessive pullback goes down through the Upperline line, then this pattern is considered a failure.
  • We look at the picture above, the meeting point of both lines (upperline and baseline) is called apex

This pattern will be accurate if the moment of penetrating the upperline line should not be too close to the apex point
Note: As a general reference the price must have penetrated the upper line for approximately 2/3 (two thirds) to 3/4 of the pattern length.
The pattern length is the distance from the baseline line to the apex point.

 In addition to occurring when the symmetrical triangle pattern uptrend can also occur during downtrend, for the way to analyze it is also the same, it's just that the downtrend is pointing down.


2.Ascending triangle

Actually the ascending triangle is not much different from the symmetrical triangle of how to analyze it. The difference is only in the form.

The ascending triangle includes a continuation pattern which often occurs in Uptrend price movements. With the emergence of this pattern, it indicates that the bullish pressure (rising) gradually exceeds the bears pressure gradually.

  • The ascending pattern must have at least four reversal points (the example drawn has six reversal points).
  • This pattern of confirmation is indicated by an upper line break that has the potential to be bullish.
  • How to estimate the target that is the price movement after penetrating the upper line line will move as far as the distance from point 2 to the upper line line (see arrow in the picture).
Even though the ascending is a continuation pattern, it can also be a reversal pattern if it occurs during a downtrend. If the situation or confirmation the upper line is penetrated so that the price that was down reversed goes up (bullish).


2.Flag and Pennant

1.Flag
Flag is basically a small channel that appears after the rally, and the direction of the channel is opposite to the direction of the rally. There are two types of Flag continuation patterns, namely:
  • Bullish flag: Occurs after a bullish rally then a small channel appears forming a downtrend.
  • Bearish Flag: Occurs after a bearish rally then a small channel appears forming an uptrend

Rally is a price movement that tends to be long because of the strong pressure of sellers and buyers.
To make it easier to understand, consider the picture below.


  • The bullish flag appears at the time of an uptrend which then forms a small bearish channel
  • This pattern is confirmed if the Upper line has been successfully penetrated by the price.
  • If the pattern is confirmed, the price movement will tend to rise or be bullish.
  • The way to determine the target is the rising price movement after successfully penetrating the upper line is along the distance of the flagpole (see picture) or the distance from point a to point b.
  • If the distance from point a to point b (length of Flagpole) is 100 pips, then the target price movement after penetrating the upper line is around 100 pips.


  • Bearish FLAG occurs when a downtrend then forms a small bullish channel.
  • This pattern is confirmed if the Upper line has been successfully penetrated by the price.
  • If the pattern has been confirmed, the price movement will tend to decrease or bearish.
  • How to determine the target is the movement down the price after successfully penetrating the lower line is along the distance of the flagpole (see picture) or the distance from point a to point b. If the distance from point a to point b (length of Flagpole) is 100 pips, then the target price movement after penetrate the lower line around 100 pips.
There are some general requirements for the continuation flag pattern, namely:
  1. A rally must occur before a small channel is formed.
  2. Small channels that are formed in the direction must be opposite to the direction of the previous rally
  3. Small channel length at least 1/3 of Flagpole length
  4. 2.Pennant

Pennant is actually the development of the form of a symmetrical triangle pattern. What distinguishes only the pennant occurs preceded by a long and fairly steep rally. You could say the penant is the result of a combination of symmetrical triangle and flag.

Therefore, the way to analyze the pennant pattern is the same as the rule of the symmetrical triangle and flag. The illustration of the sign pattern can be seen as shown below:





3. Wedge Formation and Rectangle Formation

Wedge Formation

Basically wedge formation is almost the same as pennant, the only difference is the slope of the second small channel in the same triangle, meaning the two lines are bullish wedge formation or bearish wedge formation.


We can recognize the wedge pattern by looking at the slope that points up or down.

For general rules, how to analyze it is almost the same as flag pattern:

  • The slope of the wedge (small channel) as the continuation pattern in its direction must be contrary to the current trend.
  • The Wedge formation continuation when Bullish is called the Falling Wedge
  • The Wedge formation continuation is when the Bearish is called the Rising Wedge

Need to know:

  • Although the wedge is actually a continuation pattern, the wedge can also function as a reversal pattern (although this is rare).
  • Falling wedge can be a bullish reversal pattern if it appears at the end of the Downtrend
  • Rising wedge can be a bearish reversal pattern if it appears at the Uptrend end.
Rectangle Formation


Rectangle formation continuation has many names, although it is not difficult to recognize this pattern, Rectangle formation presents a pause that occurs when the price movement moves sideways
between two parallel horizontal lines.


Some say rectangle as trading range or congestion area. Although the name is different this pattern still suggests a period of consolidation in a trend, which will usually be followed by a movement in the direction of the trend that occurred before.

Arguably wedge formation is a pattern that occurs in a trend that breaks but then resumes that direction.

4. Continuation Head and Shoulders Pattern

This pattern is the opposite of the Head and Shoulders pattern as a reversal pattern. But the head and shoulders continuation pattern that forms can be exactly the same as the head and shoulders reversal pattern. The differences are as follows:
The head and shoulders pattern appears at the downtrend. Breaking the neckline line is a confirmation of the Head and Shoulders Continuation Pattern
The inverse head and shoulders pattern appears at Uptrend. A break of the neckline line is a confirmation of the inverse head and shoulders Continuation Pattern.



5. Supply and Demand Concepts

If we define one by one are:

  • Supply means availability
  • Demand means request

Supply and demand means supply and demand, which one offers is the seller while the one who plays the role of the buyer is the buyer.

A price will be formed based on the law of supply and demand. When the supply of an item is high, but the demand for the item is low, the price will fall or fall. Likewise, the opposite. soaring up.

In simple terms, if many are selling, but few buy, the goods are less salable, as a result the prices of goods will go down.

Conversely, if many want to buy, but the supply of goods is limited, the item is selling well, and the price of the item will soar automatically.

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