We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Oil - US Crude
More View more
Real Time News
  • - #USDollar eyes #Powell second Congressional testimony - What were some of the key takeaways from his outlook? - Stock markets cautiously eye shaky US-China #trade talks https://www.dailyfx.com/forex/fundamental/article/special_report/2019/11/14/US-Dollar-Stocks-Eye-Powell-Testimony-as-Trade-Talks-Stumble.html https://t.co/gKJr3DpVOO
  • AUD/USD, USD/CAD, EUR/USD Price Trend Outlook in Positioning $AUDUSD $USDCAD $EURUSD - https://www.dailyfx.com/forex/fundamental/article/special_report/2019/11/14/AUDUSD-USDCAD-EURUSD-Price-Trend-Outlook-in-Positioning.html?CHID=9&QPID=917702 https://t.co/1i334MvltQ
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Ripple are long at 97.56%, while traders in France 40 are at opposite extremes with 85.94%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/cCz4harA5v
  • My trade video for today: ' Dow and Emerging Market Divergence a Warning, Trade Wars Outshine Powell Testimony' https://www.dailyfx.com/forex/video/daily_news_report/2019/11/14/Dow-and-Emerging-Market-Divergence-a-Warning-Trade-Wars-Outshine-Powell-Testimony.html?CHID=9&QPID=917719 https://t.co/ktgLIKeW5s
  • Forex Update: As of 05:00, these are your best and worst performers based on the London trading schedule: 🇯🇵JPY: 0.10% 🇨🇭CHF: -0.01% 🇨🇦CAD: -0.09% 🇬🇧GBP: -0.13% 🇳🇿NZD: -0.34% 🇦🇺AUD: -0.60% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/qc85e1c3xH
  • Indices Update: As of 05:00, these are your best and worst performers based on the London trading schedule: Germany 30: 0.09% France 40: 0.03% Wall Street: 0.02% US 500: -0.00% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/NUCz05xYNI
  • The $AUD appears to have resumed the dominant downtrend against its US counterpart after breaking support set from October lows. Get your $AUDUSD market update from @IlyaSpivak here:https://t.co/DW5oWIuMaX https://t.co/RYoyvGvkOd
  • Since late July, the economic news flow from Australia has been increasingly out-performing relative to economists’ expectations. -Citi #AUD
  • 🇯🇵 JPY Tertiary Industry Index (MoM) (SEP), Actual: 1.8% Expected: 1.1% Previous: 0.3% https://www.dailyfx.com/economic-calendar#2019-11-14
  • Trade deal bets kept the Singapore Dollar, Philippine Peso, Indonesian Rupiah and Malaysian Ringgit afloat despite $USD strength. This is the key fundamental driver for #ASEAN FX.Get your market update from @ddubrovskyFX here: https://t.co/aB8qP3JsB4 https://t.co/lLPkHZkj4n
Becoming a Better Trader: Classic Chart Patterns, Part I

Becoming a Better Trader: Classic Chart Patterns, Part I

2017-11-02 14:34:00
Paul Robinson, Currency Strategist

Enjoy the video? Join Paul Tuesday-Friday each week – for details, please see the Webinar Calendar.

This webinar was part-one of a two-part series on classic chart patterns, with today’s focus on three simple, but effective chart patterns. The ‘Head-and-Shoulders’ formation, both its bearish and bullish variations, rising (bearish) and falling wedges (bullish), and double tops and bottoms. To attend part II, which will be on November 16 at 10:30 GMT, you can sign up here.


We started out with a personal favorite – the ‘Head-and-Shoulders’ pattern. It consists of four key components to make for a completed sequence – 'Left shoulder', 'Head', 'Right shoulder', and the 'Neckline'. It can be a powerful topping and bottoming pattern depending on whether it forms after a sizable advance or decline. There are often-times price sequences which start to take on the shape of an H&S pattern, but we can’t truly call it a confirmed pattern until we see a closing bar below the neckline (above for an inverse, or bullish configuration). The closing bar is dependent on the time-frame which the formation is observed on – i.e. daily, 4-hr, etc. But it is very important to remember to wait for that close or else you can find yourself in a situation of selling or buying a false breakout.

Execution comes down to key three points just as it does with any trade – entry, stop-loss, and target. The entry, as already explained, must come on a confirmed break of the 'neckline'. The stop-loss should be placed sufficiently above the neckline. Two common points of reference for stops is the confirmation bar which triggered the pattern and the trend-line running from the ‘head’ across the ‘right shoulder’. Stops should be placed beyond those point to allow for wiggle room. There are a couple of approaches when establishing a position-size on the break; take a full position on the break, and the other is to enter 50% on the break and another 50% on the first pullback, with the most ideal spot coming on a retest of the neckline.

The target is determined by the symmetry of the pattern and by identifying ‘logical’ support and resistance points on the chart. The symmetry target is called a ‘Measured Move Target’ (MMT), and is simply calculated by taking the height of the formation from the ‘head’ to the ‘neckline’ and subtracting it from the ‘neckline’. For a bullish pattern, simply the opposite. ‘Logical’ levels are typically determined by looking at where price support and resistance levels are in relationship to the MMT. Sometimes these levels will be ahead of the end-target, other times beyond.

Check out this guide for ideas on how to Build Confidence in Trading.

USDJPY: 4-hr

Becoming a Better Trader: Classic Chart Patterns, Part I

Rising & Falling Wedges

This classic reversal pattern is simply a steeply angled triangular pattern which can mark the end of an extended move. It’s important to keep in mind that the rally or sell-off prior to its formation should have been lengthy. These patterns occur as volatility contracts and one side of the market is falsely given a sense that the trend will continue. In the case of a rising wedge the market is still making higher-highs and higher-lows (Falling wedges are in reverse; lower-lows and lower-highs).

To trigger a rising wedge the bottom-side trend-line needs to be broken. Falling wedges - the top-side trend-line. Stops are best placed above the high of a bearish formation and below the low of a bullish configuration. The target is the lowest (for bearish) and highest (for bullish) point of the pattern itself, or ‘logical’ points of support and resistance along the way. This is generally a good area of support or resistance from a price standpoint. But price can certainly extend well beyond, which is why it is a prudent idea (and this goes for any pattern-trade) to watch how price action behaves around targeted levels. If momentum is strong, then being patient and allowing price to continue on can take a good risk/reward trade and turn it into one with a much better risk/reward profile.

One of the examples we looked at was a rising wedge in EURGBP not long ago which had an ‘overthrow’ (a fake-out beyond the top of the pattern) before dropping precipitously once it traded below the underside of the pattern. These false breakouts draw in the ‘wrong-way’ crowd one final time, and as a result can lead to even more powerful declines once price begins to decline and stops are hit.


Becoming a Better Trader: Classic Chart Patterns, Part I

Double Tops/Bottoms

These are very simple. A double-top is the failure for price to move beyond a prior peak and then drop back below the most recent swing-low (or often times referred to as the ‘neckline’). The textbook way to enter the market is on a confirmed close below the ‘neckline’, with a stop placed above the ‘neckline’ of the pattern. Targets are determined by taking the height of the formation and subtracting it from the ‘neckline’. But just as mentioned already, using ‘logical’ price levels is sound practice. Double-bottoms are simply the bullish variation, as seen in the example below.

S&P 500: Daily

Becoming a Better Trader: Classic Chart Patterns, Part I

For the full conversation, please see the video above…

Prior ‘Becoming a Better Trader” webinars you may be interested in:Analysis, keeping it simple; Using a Checklist; Risk Management; Handling Drawdowns; 6 Mistakes Traders Make; Focusing on the Process; Creating a Trading Plan

---Written by Paul Robinson, Market Analyst

You can receive Paul’s analysis directly via email by signing up here.

You can follow Paul on Twitter at @PaulRobinonFX.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.


News & Analysis at your fingertips.