6 continuation patterns that every trader must know
A thread
A thread
2/ There are 2 key types of chart patterns:
- Continuation patterns
- Reversal patterns
- Continuation patterns
- Reversal patterns
3/ Continuation patterns tend to form in the direction of the underlying trend
Reversal patterns tend to form at the turning points of the market i.e, during trend change
Reversal patterns tend to form at the turning points of the market i.e, during trend change
4/ The risk in playing continuation patterns is comparatively less since you are trading in the direction of the trend
Reversal patterns are riskier, given you are betting against the predominant trend
Reversal patterns are riskier, given you are betting against the predominant trend
5/ In this thread, I'll cover 6 key continuation patterns:
- Bull flag
- Bear flag
- Pennant
- Ascending triangle
- Descending triangle
- Price channel
- Bull flag
- Bear flag
- Pennant
- Ascending triangle
- Descending triangle
- Price channel
6/ We’ll first look at the key characterstics for each pattern
Followed by the strategy to profit from them
Keep a close eye on the charts for all the visual learners
Followed by the strategy to profit from them
Keep a close eye on the charts for all the visual learners
7/ Bull Flag Pattern
- Long setup
- Pre-existing bullish trend
- A sharp move-up occurs, forming the flag of the pole
- Price consolidates forming the flag
- Long setup
- Pre-existing bullish trend
- A sharp move-up occurs, forming the flag of the pole
- Price consolidates forming the flag
8/ Target/Stop-loss
- Breakout point = confirmed candle close above the top resistance of the flag
- Target = flag pole distance measured from the breakout point
- Stop loss placed below the bottom support line of the flag consolidation region
- Breakout point = confirmed candle close above the top resistance of the flag
- Target = flag pole distance measured from the breakout point
- Stop loss placed below the bottom support line of the flag consolidation region
9/ Bear Flag Pattern
- Short setup
- Pre-existing bearish trend
- A sharp move down occurs, forming the flag of the pole
- Price consolidates forming the flag
- Short setup
- Pre-existing bearish trend
- A sharp move down occurs, forming the flag of the pole
- Price consolidates forming the flag
10/ Target/Stop-loss
- Breakout point = confirmed candle close below the bottom support of the flag
- Target = flag pole distance measured from the breakdown point
- Stop loss placed above the top resistance line of the flag consolidation region
- Breakout point = confirmed candle close below the bottom support of the flag
- Target = flag pole distance measured from the breakdown point
- Stop loss placed above the top resistance line of the flag consolidation region
11/ Pennant Pattern
Same principles as a bull/bear flag, with one key difference:
Instead of a rectangular consolidation region → pennant-shaped consolidation range
Same principles as a bull/bear flag, with one key difference:
Instead of a rectangular consolidation region → pennant-shaped consolidation range
12/ Ascending Triangle Pattern
- Long setup
- Pre-existing bullish trend
- Horizontal resistance line with at least 2 touch points
- Ascending line of support forms each time the price gets rejected off the resistance
- Long setup
- Pre-existing bullish trend
- Horizontal resistance line with at least 2 touch points
- Ascending line of support forms each time the price gets rejected off the resistance
13/ Target/Stop-loss
- Breakout point = confirmed candle close above the horizontal resistance
- Target = widest distance in the triangle measured from the breakout point
- Stop loss placed below the ascending line of support, under the breakout region
- Breakout point = confirmed candle close above the horizontal resistance
- Target = widest distance in the triangle measured from the breakout point
- Stop loss placed below the ascending line of support, under the breakout region
14/ Descending triangle Pattern
- Short setup
- Pre-existing bearish trend
- Horizontal support line with at least 2 touch points
- Descending line of resistance forms each time the price bounces on the support line
- Short setup
- Pre-existing bearish trend
- Horizontal support line with at least 2 touch points
- Descending line of resistance forms each time the price bounces on the support line
15/ Target/Stop-loss
- Breakdown point = confirmed candle below above the horizontal support
- Target = widest distance in the triangle measured from the breakdown point
- Stop loss placed above the descending line of support, above the breakdown region
- Breakdown point = confirmed candle below above the horizontal support
- Target = widest distance in the triangle measured from the breakdown point
- Stop loss placed above the descending line of support, above the breakdown region
16/ Price channel Pattern
- It takes at least two points to draw the main trend line, which sets the tone for the trend and the slope
- Bullish price channels occur in uptrends and bearish price channels in downtrends
- It takes at least two points to draw the main trend line, which sets the tone for the trend and the slope
- Bullish price channels occur in uptrends and bearish price channels in downtrends
17/ What happens if the channel breaks?
- A break of the channel in the direction of the main trend = a sign of the acceleration of the underlying trend
- A break in the opposite direction of the main trend = a sign of trend weakening/trend change
- A break of the channel in the direction of the main trend = a sign of the acceleration of the underlying trend
- A break in the opposite direction of the main trend = a sign of trend weakening/trend change
18/ The more a trader uses these patterns, the better the eye gets trained to spot them
Time to get some practice
Time to get some practice
19/ Keep an eye out for a thread on reversal patterns in the not-so-distant future
20/ Thanks for reading!
If you liked this, please like and retweet the first tweet below.
And follow @gameoftrades_ for more market insights, finance, and investment strategy content.
If you liked this, please like and retweet the first tweet below.
And follow @gameoftrades_ for more market insights, finance, and investment strategy content.
جاري تحميل الاقتراحات...