Some behaviours exhibited by the forex market are repetitive. These behaviours have been studied over time and are called forex chart patterns.
and yes, apart from chart patterns, we also have what we call candlestick patterns that you can learn more about here.
Therefore, forex traders and market analysts have noticed these patterns and have devised ways to trade with them.
In this article, I will show you 15 profitable forex chart patterns, and how to spot and trade with them.
The essence of forex trading is to make profits, hence, the forex chart patterns listed below are some of the most accurate which would result in more profitable trades.
It’s also important to note that this pattern also works effectively when trading the stock market.
- Forex Chart Pattern Cheat Sheet – Most Profitable Forex Chart Patterns PDF
- #1. Double Top Forex Pattern
- #2. Double Bottom Forex Pattern
- #3. Head and Shoulders Forex Pattern
- #4. Inverse Head and Shoulders Forex Pattern
- #5. Triple Top Forex Chart Pattern
- #6. Triple Bottom Forex Pattern
- #7. Ascending Channel
- #8. Descending Channel
- #9. Cup and Handle Pattern Forex
- #10. Rounding Bottom Forex Pattern
- #11. Rounding Top Forex Pattern
- #12. Bullish flag Forex Pattern
- #13. Bearish Flag Forex Pattern
- #14. Bullish Rectangle Forex Pattern
- #15. Bearish Rectangle Forex Pattern
- Pattern Chart Trader
- Types of Forex Chart Patterns
Forex Chart Pattern Cheat Sheet – Most Profitable Forex Chart Patterns PDF
I got you, you want to download the PDF and read later? or use as a reference to fall back to?
Download the forex chart pattern pdf cheat sheet for free below: sent directly to your email.
#1. Double Top Forex Pattern
The double top pattern is a chart pattern that signifies a market reversal. More precisely, the double top pattern indicates a bullish to bearish reversal.
Two highs of nearly equal heights make up this chart pattern. Looking closely at the double top pattern, it looks like the alphabet letter M. hence, the name double top as it occurs in the letter M.
A double top is a reversal pattern that forms after an uptrend, and it brings it (uptrend) to an end.
When the price struggle to get past a certain price point on consecutive occasions, the double top is formed.
The fact that a new higher high wasn’t made shows indecision in the market. A strong move beneath the neckline of the double top validates the pattern.
#2. Double Bottom Forex Pattern
The double bottom pattern is a classic chart pattern that indicates a bullish reversal. Can be found at the end of a downtrend, it emerges and shifts the market structure to the upside.
This chart pattern is characterized by two lows of nearly equal lengths looking similar to the letter ‘W’.
After a prolonged downtrend, they’ll be a time when the bears (sellers) start to weaken. Sometimes when the bulls slowly start to take over, a double bottom appears.
This pattern forms when the price struggles to break a level called “support”. The price tests this level of support twice.
In short, the double bottom consists of two lows and a single neckline. The neckline is the most important feature of the double bottom.
An important piece of information to keep in mind is that the double bottom pattern holds more value when it appears at the end of downtrends.
#3. Head and Shoulders Forex Pattern
The head and shoulders pattern is one of the most popular classical chart patterns. It is a reversal pattern that forms at the end of uptrends.
The head and shoulders pattern signifies exhaustion of bullish strength.
It consists of a peak (shoulder), a higher peak (head), and a last, smaller peak (shoulder). When the lowest points of the two troughs are connected it is called a neckline.
After the neckline is broken, the pattern is completed and a final retest of the neckline may occur before the continued decline.
#4. Inverse Head and Shoulders Forex Pattern
The inverse head and shoulders pattern is also a sign of reversal. It forms at the end of downtrends shifting structure to the upside.
This pattern shares every characteristic with the regular head and shoulders, the only difference is it is inverted (upside down).
Sooner or later, the strength of sellers in a downtrend is bound to decrease. When this happens and a new lower low fails to form, the inverse head and shoulders pattern arises.
The presence of the inverse head and shoulders pattern indicates a change of character. That is before this pattern is completed, the structure is clearly bearish.
Upon its completion, the market fails to further decline. As a forex trader, this action should tell you the market’s cycle is changing.
The overall trend will slowly change to a bullish tone. Therefore, only buy orders should be taken at this point.
#5. Triple Top Forex Chart Pattern
The triple top pattern is a very popular chart pattern that represents a bearish reversal. Three highs of nearly equal highs make up this chart pattern.
Looking closely at the triple top pattern, it slightly resembles the head and shoulders pattern.
But unlike the triple top pattern, one of the highs of the head and shoulders pattern is higher than the other two.
The triple top pattern is a sign that bullish strength is diminishing. market place. It happens when buyers are not in control of the market anymore.
Additionally, just like a few other forex chart patterns, the triple top has a neckline too.
#6. Triple Bottom Forex Pattern
The triple bottom pattern is a classic chart pattern that reverses the trend of a market upwards.
The triple bottom pattern is one of the most common chart patterns used in trading.
It consists of three consecutive lows at the same price level. These lows are usually accompanied by strong volume. These lows are relatively equal and are spaced out.
Every time the price approached this level of support, it rejected and formed a few highs that serve as the range’s upper limit. We will have the neckline of this pattern by joining these highs as seen in the image above
After a long bull/ bear run, the market must correct itself or the trend might change. This is how the triple bottom forms.
However, in this case, bears are not in control of the market’s narrative any longer so a reversal occurs.
#7. Ascending Channel
The ascending channel pattern is a chart pattern that signifies bullishness. It is also referred to as channel up as it pushed prices upward.
Channels generally are formed when a trendline used to connect highs is parallel to a trendline that connects lows.
Trendlines are an easy tool drawn either above highs or below lows in order to get a grasp of the current market’s climate. With this analytic tool, the future direction of currency pairs is predicted.
Most traders are only familiar with sideways ranges. A channel is a unique type of trading range that arises when two trendlines connecting the highs and the lows of a trend respectively are parallel to one another.
The trendlines act as the boundary of the trading range. The upper trendline acts as a diagonal resistance while the lower trendline act as diagonal support.
Ideally, the price should bounce/ reverse when it gets to the upper or lower resistance. Price will keep respecting these boundaries and gradually climb up.
#8. Descending Channel
When a currency pair is down-trending, lines can be drawn to connect the lower highs and lows. If the result is two lines parallel to each other, it is a descending channel pattern.
A channel is a unique type of trading range that arises when two trendlines connecting the highs and the lows of a trend respectively are parallel to one another.
In an ascending channel, price respects both trendlines and steadily climbs up. Conversely, in a descending channel, price uses the trendline as a boundary and falls slowly.
A descending channel is a bearish pattern that consists of a series of lower highs and lower lows.
The trendline connecting these highs acts as a form of resistance. While the trendline connecting the lows is diagonal support. Looking closely, the descending channel looks like a typical sideways range slanted.
When the price is trading in a descending channel, it is overall in a downtrend. Therefore, the price of the pair/ commodity lowers.
#9. Cup and Handle Pattern Forex
The cup and handle pattern is a bullish continuation pattern. This means that it appears after a retrace and continues the bullish trend.
Moreover, the cup of the pattern is formed due to consolidation. While the handle forms after a breakout to continue the trend.
#10. Rounding Bottom Forex Pattern
The rounding pattern is used to detect the end of downtrends. It looks like the regular letter U and it seems similar to the cup of the cup and handle pattern.
#11. Rounding Top Forex Pattern
Contrary to the rounding bottom, the rounding top signals the end of an uptrend. This forex chart pattern looks like an inverted ‘U’.
The rounding top can be viewed as a distribution phase. Distribution is a market phase that arises when the market is overbought.
#12. Bullish flag Forex Pattern
The bull or the bullish flash is a continuation pattern that forms in between an uptrend. During a trend, there are impulsive moves and retracements.
Retracements are necessary for healthy price action when the market is overbought/ oversold.
Furthermore, when an orderly retracement that resembles a slanted rectangle occurs before the bullish trend continues, it is a bull flag.
#13. Bearish Flag Forex Pattern
The bear flag is a bearish continuation pattern, the same rules that apply to its counterpart apply to it as well.
But here, it forms during a pullback of an impulsive downwards move. After its formation a breakout to continue the bearish trend follows.
#14. Bullish Rectangle Forex Pattern
The forex market is either uptrending, downtrending, or ranging. In a range, there’s no clear winner between the bulls and bears which results in sideways movement.
Therefore, the price is bound in a fixed area by support and resistance levels. This range doesn’t last forever, eventually, there’s a breakout to start a new trend.
When this breakout is to the upside, it is a bullish rectangle that triggers the start of a new uptrend.
#15. Bearish Rectangle Forex Pattern
When the forex market is ranging between support and resistance. These levels are tested repeatedly, this action weakens the support and resistance levels and a breakout occurs.
If this breakout is to the downside, it is a bearish rectangle and a downtrend begins.
It involves a series of actions that stop a downtrend and start an uptrend. In more technical terms, it is accumulation.
Accumulation occurs just before the trend reversal, a range-like structure emerges before the move upwards.
Pattern Chart Trader
who is a chart pattern trader? a chart pattern trader is a trader that have mastered different chart patterns and is able to interpret and use them to trade the market successfully.
For every beginner forex trader, chart pattern trading is a good place to start your trading career. Master each pattern one by one and practice on a demo account.
In this article I have listed and explained 15 forex patterns that you can learn and master on your own to become a pro pattern chart trader.
I also provided a downloadable forex chart patters PDF cheat sheet for free.
Types of Forex Chart Patterns
Forex patterns are classified based on the kinds of signals they give. just like on a highway, a red signal tells you to stop and a green signal tells you to proceed. In the same way, forex patterns are price indicators which can predict where the market is heading next.
For example, some patterns like the double top pattern usually signify a market reversal while a bearish flag pattern will signify that the market will continue in a particular direction.
You can then use the signals from these patterns to decide whether buy or sell a currency pair, whether to go long or short.
Reversal Patterns Forex
What is a reversal pattern? a reversal forex pattern is any pattern that indicates that the market will abandon its current trend or direction and then move in the opposite direction.
When you spot this kind of pattern, then you can easily predict that the market price will reverse from its current trend. If the market was going up, then it will down soon. and that’s the simple explanation.
Below is a list of reversal chart patterns with more explanations on how how to spot and trade each down below in this article.
- double top pattern,
- double bottom pattern,
- head and shoulders pattern,
- reverse head and shoulders pattern,
- triple top pattern,
- triple bottom pattern,
- cup and handle pattern,
- rounding bottom pattern,
- rounding top pattern.
what about continuation patterns?
Continuation Patterns Forex
what is the continuation pattern in forex? just as the name sounds, continuation patterns signal that the market will continue in its current direction.
For example, if the market is trending in the buy direction and you then spot one of the continuation patterns listed below, then you can predict that the market will continue to trend in the buy direction.
Continuation patterns predict continuity. A few examples are listed below
- bullish flag pattern
- bearish flag pattern
- bullish rectangle pattern
- bearish rectangle pattern
Bilateral usually means a two-sided situation. So, for bilateral patterns, they signal that the market can take any direction, either bullish or bearish.
Can you trade with bilateral patterns? yes. Just like the other patterns discussed above, you set a pending order on either side of these kinds of patterns. When one trade is triggered, then you cancel the other pending order. It’s advisable to set your stop loss considerably far away from the entry points.
Patterns that can be considered bilateral are listed below:
- ascending channel
- descending channel
- symmetrical triangle
Bullish Forex Chart Patterns
what is a bullish forex chart pattern? these kinds of patterns will signify that the market is about to go bullish, that is, the price will rise in the upward direction. usually an uptrend.
forex chart patterns that can signify a bullish pattern include:
- double bottom pattern
- inverse head and shoulder pattern
- triple bottom pattern
- cup and handle pattern
- rounding bottom pattern
- bullish flag pattern
- bullish rectangle pattern
Bearish Chart Pattern
Bearish is the opposite of bullish. A bearish pattern signifies that the market will likely proceed in the bearish direction. That means, prices will fall and a downtrend would occur.
- double top pattern,
- head and shoulders pattern,
- triple top pattern,
- rounding top pattern,
- bearish flag pattern,
- bearish rectangle pattern
Frequently Asked Questions About Forex Chart Patterns
Chart patterns in the forex market work all the time. Some certain patterns have higher accuracy than others.
To fully utilize them, understand the situations in which they appear (either the end of an uptrend/ downtrend). Then, each pattern has a specific guideline to watch out for additional sentiment.
In forex, patterns repeat themselves over and over again. A titan of technical analysis named Ralph Nelson Elliott studied the market from 1920-1930.
What he arrived at is that the market consists of re-occurring patterns. The behaviour of the market down to trends is repetitive.
Learning to understand these cycles in the market is what makes a good forex trader.
There over 15 forex chart patterns. but not many are useful. I will advise you test each one explained in this article on your own. but for me, head and shoulder pattern is the best.
Honestly, there is no definite answer to this. The best way to make profits with chart patterns is when you are able to combine a few to form a signal before placing any trade.
Summary: Forex Chart Patterns
Forex chart patterns are a straightforward way to trade the forex market. Thereby, it can serve as useful artillery in trading. The most accurate chart pattern is the head and shoulders.
Although before trading any of these patterns it is important to learn the rules of each one. A common is a neckline, which determines if the pattern is valid or not.
Learn to correctly draw a neckline and also where to set the stop losses for each pattern as well!
Here is a summary of the forex chart patterns we have explained in this article;
- double top pattern forex,
- double bottom pattern forex,
- head and shoulders pattern forex,
- reverse head and shoulders forex pattern,
- triple top pattern forex,
- triple bottom pattern forex,
- cup and handle pattern forex,
- rounding bottom pattern forex,
- rounding top pattern forex
- ascending channel forex pattern
- descending channel forex pattern
- symmetrical triangle forex pattern
- bullish flag pattern forex pattern
- bullish rectangle pattern forex pattern
- bearish flag pattern forex pattern
- bearish rectangle forex pattern