The graphic shapes identification is one of the common types of technical analysis. It includes the analysis patterns which are shaped as a result of price movements are of geometric nature. Implementation of Internet trading with the aid of graphic shapes has become rather widespread. And the Forex graphic shapes themselves have already become a part of the trading system for many traders.
Forex shapes are divided into two types. There are shapes, which reflect the continuous price trend and shapes, which reflect the reversal price movement.
The "Head and shoulders" pattern. This figure is of reversal type. When the second peak forms the maximum above the first one, the "head" is formed. When the third peak is reached, it is usually lower than the second one, and when it is formed one should find time to opening an order.
It should be noted that all figures, as such, do not necessary have a perfect shape. The most important here is that the graph should have the most similar pattern.
The "double top" pattern. It is also a pattern of price reversal, with the only difference that it has two approximately equal peaks.
These two shapes or pattern of the character of price can be as the rising and falling. It means that if there is an inverted "head shoulders" pattern or inverted "double top" pattern, which is also called "double bottom", it means that the trend "goes" towards the bullish direction.
One should pay great attention to the lines, which shape the basis of the structure (they are shown in dash-dot line) in the trading on the graphic figures. The horizontal line of support and resistance is embedded in the base. And the orders should be opened only when these lines were defined clearly.
The Forex shapes that reflect the continuous price trend are more dynamic as a continuation of motion itself carries no uncertainty, unlike the reversal movement. And this movement should be confirmed. Thus it is easier in terms of working with the continuous price.
The "Triangle" pattern. This figure appears frequently on the price chart, and many traders do not miss a chance to use it. But you should know a little nuance. There is such a thing as "false" or "wrong" triangle. We will explain the essence of it further.
When the price goes out of the shape zone, and actually breaks it, the very first corner becomes the resistance line. It becomes the directing vector of the price movement. When a trader sees a break through, he should immediately open the order in this case for selling. But the price, which reaches the minimum low, may meet the resistance line and step back to the line of shape. Traders just close orders, when they meet incomprehensible behavior of the prices. And the price after the second time will fall significantly.
The "wedge" pattern. This is a very common graphic shape. Wedge is usually a tasty morsel for traders. The principle of this figure is to work out a price in the opposite direction, in the wedge direction.
When the price reaches the line which is opposite to the line which had to be overcame the order should be opened. But it's better to be convinced that the line was penetrated. And what is important, the wedge can facilitate the continuation of the movement that was before it and change it as well.
The "flag" pattern. It is also called a simply inclined channel. Generally, a shape formed by two equidistant lines is very often called channel in trading.
Everything is clear and simple here. The line is penetrated when the price has a growing trend. And the flag itself is just a multidimensional rollback. It can be called the easiest graphic.
It should be noted that the trader should pay a very serious attention to the graphical shapes as they can change easily. Thus, if the "flag" is drawn, it will be enough to reduce at least the last minimum and the “flag” will transform into the "wedge". If you increase the minimum or at least the minimum of a symmetrical triangle, it will transform into a "wedge ". The graph is so inert that even in the most probable interpretations Forex shapes can be unpredictable.Social button for Joomla