In this topic we will discuss the second part of Buy&Sell fore signals.
Related: Forex Signals 2019: Buy&Sell (Part1)
Now that we’ve looked at the three candlestick patterns I use, let’s dive into the three chart patterns. These include the head and shoulders, channels and wedges.
The good news is that we don’t have to wait months or years to trade. With dozens of currency pairs at our disposal, there’s almost always something to do.
Chart Pattern Buy & Sell Signals
Head and shoulders
When it comes to profitability, the head and shoulders pattern is at the top of the list. It typically forms after an extended move up and signals exhaustion from buyers.
The inverse head and shoulders pattern also represents a potential reversal but does so after an extended move down and signals exhaustion from sellers.
The reason I say these formations can be highly profitable is that they often provide several hundred pips of profit if traded successfully.
Note that the head and shoulders also comes with what’s called a measured objective. This is a potential profit target that’s found using the height of the structure.
Channels (ascending and descending)
Channels occur more often than most traders probably realize. They are particularly plentiful after an impulsive move up or down. The channels that form in this manner are known as bull and bear flags.
If you’ve followed me for a while, you’ve no doubt seen me comment on either an ascending or descending channel. In fact, I bet not a single week goes by where I don’t use a channel to outline the price action on a given chart.
They offer an excellent way to identify and outline periods of consolidation which can provide an opportunity to play the subsequent breakout.
Note how the ascending channel above began forming after an extended move lower
Wedges (narrowing and broadening)
Like channels, wedges usually represent consolidation. However, what sets them apart is their terminal nature. In other words, a narrowing wedge has a definitive end point whereas a channel does not.
The two charts below show the difference between a narrowing wedge and a broadening wedge.
Note how unlike the narrowing wedge in the first chart, the price action in a broadening formation “fans out” as time passes.