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Continuation patterns in forex trading market

Continuation Patterns

Chart patterns shapes which can help a trader not only understand the price action, but also make predictions about the price possible movement. Trend  continuation patterns are figures of the same type which are formed as a result of price consolidation  during its movements. They are formed at shorter time intervals during the pause in the current market trends and mainly mark the movement continuation.They suggest that the market will maintain an established trend. Continuation patterns help traders to differentiate between a price action that is in full reversal and those just taking a pause. Most traders believe that there is a time to trade and a time to rest as the formation of continuation candlestick patterns imply consolidation, that is  a time to rest and watch. These patterns indicate that the price action displayed is a pause in the prevailing trend and that upon breaking out of the pattern the price trend will continue in the same direction.

These patterns indicate that the price action displayed is a pause in the prevailing trend and that upon breaking out of the pattern the price trend will continue in the same direction. The most popular figures included in the continuation patterns and consequently presented below are:

Continuation Forex Patterns
Continuation Forex Patterns
  • Ascending Triangle
  • Descending Triangle
  • Symmetric Triangle
  • Bullish Rectangle
  • Bearish Rectangle
  • Flag
  • Pennant
  • Wedge
Ascending Triangle in Forex
Ascending Triangle in Forex

Ascending Triangle.

represents a trend continuation pattern which is formed in an uptrend serving as a confirmation of existing direction.
It displays a narrowing range between high and low prices which visually form a triangle.The ascending triangle is characterized by a
horizontal trendline called resistance and an ascending trendline called support. The former connects the price highs arranged at the same level and the latter connects price higher and higher lows. Price break above the resistance line usually somewhere between halfway and ¾ length of the pattern indicates a signal to buy.

How to calculate
T = R + H,
Where:
T – target price;
R – resistance (horizontal line);
H – pattern’s height (distance between support and resistance lines at pattern’s origin).

Descending Triangle Forex
Descending Triangle Forex

Descending Triangle.

represents a trend continuation pattern which is formed in a downtrend serving as a confirmation of existing direction.
It displays a narrowing range between high and low prices which visually form a triangle. The descending triangle is characterized by a descending trendline called resistance and a horizontal trendline called support. The first one connects lower and lower highs and the second one connects price lows arranged at almost the same level. Price break below the support line usually somewhere between halfway and ¾ length of the pattern indicates a signal to buy.

How to calculate
T = S – H,
Where:
T – target price;
S – support (horizontal line);
H – pattern’s height (distance between support and resistance lines at pattern’s origin).

About Muhammad Shahid Memon

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