By now you are aware of a handful of patterns that you’ll see form in the market. It is not my intention to provide a complete review of all patterns, but rather to just touch upon the topics of triangles with the perspective of “Sailing” in mind. This is more to introduce “Diamonds”. Triangles can happen in virtually any scale, however you see them more frequently in the smaller time scales. When you see a triangle you can certainly trade the eventual breakout, but if the triangle is large enough then feel free to range trade within it (if you recognize it soon enough) on smaller charts (by going to the smaller trends more clearly seen on those smaller chart scales). Tip: I find, from my own observations, that GBP/USD often makes nice triangles, more so it seems than other pairs. How do you find a triangle early in formation? Look for an “In-Wave BiDirectional” situation (as first shown in “Forex Scalping”). As the triangle keeps forming you’ll find that it “retraces” according to typical Fibonacci theory; the 79% seems to be very common for triangles, but can also happen with the 62%.
What you’ve just seen on those two charts is a “Diamond” formation, which is
typically a reversal pattern (though I have seen them as
continuations). Typically they have a sharp up then a sharp down to and from
the Diamond.
I typically think of Diamonds as really a consolidation that had a pronounced
Bull/Bear trap. (I also think of them to be similar to an island reversal that
would be possible for trading commodities, but you won’t normally see a true
island in Forex.) Anyhow, if you look at it, it appears like two triangles back
to back. A backwards one at the start that gets progressively wider, then aregular triangle that gets tighter. When you see an occasional Diamond then
trade it as you typically would trade a triangle. Remember that often it’ll be a
reversal, so you can anticipate that likely possibility.
What about other patterns? I don’t want to get onto the subject of
reviewing all the common patterns here in this eBook. I think it is
sufficient to say that you should by now (having read the other eBooks)
understand some of the most common patterns. Basically the rule of
thumb is to be aware of them and to engage in a “Sailing” style of trade
once you see a familiar pattern
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