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Forex Reverse Head and Shoulders Pattern

February 27, 2010 By Raj 1 Comment

Forex Reverse Head and Shoulders Pattern:

Forex reverse head and shoulders pattern is similar to the normal head and shoulders pattern but it forms in a down trend and in the format. This is a bullish pattern. This indicates a reversal after an down trend.

In the following picture a head and shoulders pattern is shown. The line drawn connecting the high points of the pattern is called neck line.

Forex reverse head and shoulders format

Forex reverse head and shoulders format

Trade entry:

when you see a reverse head and shoulders format, wait until the neck line is broken with a strong candlestick. A strong candlestick means a candlestick which has a large body compared to the tails. In the following picture the neck line is broken with a strong candlestick body and moreover the candlestick does not have long tails so it is a very good opportunity to enter a long trade.

Forex reverse head and shoulders pattern broken by strong candlestick body

Forex reverse head and shoulders pattern broken by strong candlestick body

If the neck line is broken by the tail of a candlestick and not by the body of the candlestick then do not enter the trade. Check the following picture. In the following picture the neck line is broken by the tail of the candlestick and not by the body of the candlestick and moreover the candlestick has long tail. So do no enter the trade.

Forex reverse head and shoulders pattern broken by candlestick tail

Forex reverse head and shoulders pattern broken by candlestick tail

Stop loss and take profit:

Once the break out occurs enter a long trade. Measure the difference between top of head and neck line. Breakout should be same as the difference. Set stop loss below neckline. Set target(limit) for less than the difference between head and neckline.

Check the following picture. In the following picture the difference between the neck line and the bottom of the reverse head is 70 pips. So the break out is 70 pips. But once the break out occurs the candlestick penetrated upwards for around 15 pips. So the remaining profit potential is 55 pips. Since we have to use the profit target a little less than the actual, use it around 5 pips below the actual target. So the remaining profit target is 50 pips.

Take profit and stop loss

Take profit and stop loss

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Forex head and shoulders pattern

February 27, 2010 By Raj Leave a Comment

Forex Head and Shoulders Pattern:

Forex head and shoulders is a technical pattern that resembles the two shoulders and the head of a humanbeing. This is a bearish pattern. This indicates a reversal after an upward trend. This is a more common pattern in long term trends. The head and shoulder pattern consists of three peaks of price movement. The middle peak is higher than the left and right peaks.

In the following picture a head and shoulders pattern is shown. The line drawn connecting the low points of the pattern is called neck line.

Forex head and shoulders

Forex head and shoulders

Trade entry:

when you see a head and shoulders format, wait until the neck line is broken with a strong candlestick. A strong candlestick means a candlestick which has a large body compared to the tails. In the following picture the neck line is broken by a strong candlestick body and moreover the candlestick does not have long tails so it is a very good opportunity to enter a short trade.

Forex head and shoulders pattern broken by strong candlestick body

Forex head and shoulders pattern broken by strong candlestick body

If the neck line is broken by the tail of a canldestick and not by the body of the candlesick then do not enter the trade. Check the following picture. In the following picture the neck line is broken by the tail of the candlestick and not by the body of the candlestick and moreover the candlestick has long tail. So do no enter the trade.

Forex head and shoulders pattern broken by candlestick tail

Forex head and shoulders pattern broken by candlestick tail

Stop loss and take profit:

Once the break out occurs enter a short trade. Measure the difference between top of head and neck line. Breakout should be same as the difference. Set stop above neckline. Set target(limit) for less than the difference between head and neckline.

Check the following picture. In the following picture the difference between the neck line and the top of the head is 70 pips. So the break out is 70 pips. But once the break out occurs the candlestick penetrated downwards for around 15 pips. So the remaining profit potential is 55 pips. Since we have to use the profit target a little less than the actual, use it around 5 pips above the actual target. So the remaining profit target is 50 pips.

Take profit and stop loss

Take profit and stop loss

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Forex Double Bottoms

February 27, 2010 By Raj Leave a Comment

Forex Double Bottom:

Forex double bottom is a bullish pattern. It indicates a reversal after a downward trend. It is very easy to identify.

1) First there will be sharp downtrend.
2) Now the price rises agin creating the first low point
3) Now the price falls again to the first low point creating a first high point.
4) Now the price rises again creating the second low point and once the price crosses the first high point it is expected to be a long rise.
5) Double bottoms should look like a “W” when complete.

Double bottoms occur after a strong downward trend. To say a forex pattern as a double bottom pattern it must have two flat bottoms and one common high price. Double bottoms are similar to rectangles except double bottoms occur at a relatively new lows.

Check the following picture. In the following picture you can see two flat lows and a common high point and it formed a double bottoms.

Forex double bottoms

Forex double bottoms

Trade Entry:

Once you feel that a double bottoms pattern is forming on any forex price chart, draw a line connecting the the two flat lows. Draw a parallel line to this at the top point. This line we can say it as resistance line. Now once the price crosses the resistance line with a strong candlestick body enter a long trade. A strong candlestick body means a candlestick which has a large body compared to the tail of the candlestick. Check the following picture. In the following picture the resistance line was broken by a strong candlestick body so it is a good opportunity to enter a long trade.

Fforex double bottoms pattern broken by a strong candlestick body

Fforex double bottoms pattern broken by a strong candlestick body

If the resistance line is broken by the tail of the candlestick and not by the body of the cnadlestick do not enter the trade. Check the following picture. In the following picture the resistance line is broken by the tail of the candlestick and not by the body of the candlestick. So do not enter long trade here.

Forex double bottoms pattern broken by candlestick tail

Forex double bottoms pattern broken by candlestick tail

Take profit and stop loss:

Measure the difference between the top and bottom of the double bottom. Break out should be same as the difference. Enter when the break out occurs. That means when the resistance line is broken by a strong candlestick, wait until the candlestick is complete and then enter trading. Set stop loss below the high price of the double bottom. Set profit target (limit) for less than the difference between top and botom.

For example check the folloowing picture. In the following picture the differene between the top and bottom of the double bottom is 100 pips. Once the break out occurs the bullish candlestik went up around 10 pips. So the remaining profit target is 90 pips. But since we are using profit target for less than the difference between the top and bottom set the target for around 85 pips which is 5 pips below the actual target. Check the following picture.

Take profit and stop loss

Take profit and stop loss

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Forex Double Tops

February 27, 2010 By Raj Leave a Comment

Forex Double Tops:

Forex double tops is a bearish pattern. It indicates a reversal after a strong upward trend. It is very easy to identify.

1) First there will be sharp uptrend.
2) Now the price falls creating the a first high point
3) Now the price raises again to the first high point creating a first low point.
4) Now the price falls again creating the second high point and once the price crosses the first low point it is expected to be a long fall.
5) Double tops should look like a “M” when complete.

Double tops occur after a strong upward trend. To say a forex pattern as a double top pattern it must have two flat highs and one common low price. Double tops are similar to rectangles except double tops occur at a relatively new highs.

Check the following picture. In the following picture you can see two flat highs and a common low point and it formed a double top pattern.

Forex double tops

Forex double tops

Trade Entry:

Once you see that double tops pattern is forming on any forex price chart, draw a line connecting the the two flat highs. Draw a parallel line to this at the low point. This line we can say it as support line. Now once the price crosses the support line with a strong candlestick body enter a short trade. A strong candlestick body means a candlestick which has a large body compared to the tail of the candlestick. Check the following picture. In the following picture the support line was broken by a strong candlestick body so it is a good opportunity to enter a short trade.

forex double tops pattern broken by the strong candlestick body

forex double tops pattern broken by the strong candlestick body

If the support line is broken by the tail of the candlestick and not by the body of the cnadlestick do not enter the trade. Check the following picture. In the following picture the support line is broken by the tail of the candlestick and not by the body of the candlestick. So do not enter long trade here.

Forex double tops pattern broken by candlestick tail

Forex double tops pattern broken by candlestick tail

Take profit and stop loss:

Measure the difference between the top and bottom of the double top. Break out should be same as the difference.
Enter when the break out occurs. That means when the support line is broken by a strong candlestick, wait until the candlestick is complete and then enter trading. Set stop loss above the low price of the double top. Set profit target (limit) for less than the difference between top and botom.

For example check the folloowing picture. In the following picture the differene between the top and bottom of the double tops is 100 pips. Once the break out occurs the bearish candlestik went down around 10 pips. So the remaining profit target is 90 pips. But since we are using profit target for less than the difference between the top and bottom set the target for around 85 pips which is 5 pips above the actual target. Check the following picture.

Take profit and stop loss

Take profit and stop loss

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Some of the profitable trades I had this week

February 27, 2010 By Raj Leave a Comment

AUDNZD ascending wedge:

The following is the four hour chart of AUDNZD. It was in an ascending wedge for some tome and it was broken two days back. I was watching both four hour chart and hourly chart and when it was broken in hourly chart, it retraced back to the trend line. When it retraced back I immediately entered a short trade.

Check the following four hour chart.

AUDNZD four hour chart:

AUDNZD four hour chart

AUDNZD four hour chart

Check the following hourly chart also. When it retraced back to the trend line in the hourly chart I entered a short trade. Used a stop loss 5 pips above the trend line. The total stop loss is around 10 pips. Used a take profit of around 50 pips. It hit the take profit after around 6 hours. This is a 1:5 trade which worked very well.

AUDNZD hourly chart:

AUDNZD hourly chart

AUDNZD hourly chart

EURUSD Trend line break:

The following is the hourly chart of EURUSD and there is a trend line I draw which was broken by a strong bullish candlestick. When it was broken by it I immediately entered a long trade. I used a stoploss of around 5 pips below the last low point. Currently I am in a profit of around 30 pips. I left it as it is and I will close it once I get a good profit on it. Check the following hourly chart of EURUSD.

EURUSD hourly chart

EURUSD hourly chart

USDCHF Trend line break:

The following is the hourly chart of USDCHF currency pair and there is a trend line for it which was broken by a strong bearish candlestick. When it was broken I immediately entered a short trade. I used a stop loss of around 5 pips above the last high point. Currently I am in a profit of around 25 pips. I left it as it is and I will clsoe it once I get a good profit on it. Check the following houlry chart of USDCHF.

USDCHF hourly chart

USDCHF hourly chart

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