Investment Patterns in Trading

[coolmind]

Operating is not only a matter of knowledge, intuition and skills, it is also about discovering small details and using them to your advantage. Every professional trader would kill for an instrument that predicts market behavior with 100% accuracy. Unfortunately, there is no such instrument, is there?

Still, there are special tools that can help you. Reversal patterns, as their name suggests, find trend reversal points. Being able to tell when the trend is about to change direction can be of great help to a trader, no matter what asset he is interested in.

Although not completely bulletproof, these three patterns are able to provide traders with a signal when the trend is about to change direction. Both beginner and experienced traders will benefit from them. Therefore, you could familiarize yourself with the patterns and possibly apply them to trading, even as a support tool.

 

[Anthony Constantinou]

Anthony Constantinou (CWM FX) says, "Recognizing the "correct" trade will mean that you know the difference between a good possible situation and ones to keep away from."

 

[Lene Hutmacher]

Flag patterns are a continuation pattern and my personal favourite. Reason being, if price is forming regular neat flag patterns and you are trading that instrument, then you are likely seeing good returns to your account. theoretically each flag offers an opportunity to compound.

A flag pattern forms when price takes a short breather before breaking out and continuing the trend. A flag should be between 2 and 11 bars. If it’s more then price is entering the realms of a consolidation or deeper pullback. A confirmation of a flag pattern in an uptrend takes place when price breaks and closes above the pivot high before price took a breather. Of course the reverse is true of a downtrend. The textbooks will say that the breather should form the shape of a flag and the breakout bar (flagpole) should engulf the entire move. In the real world that doesn’t happen often as the chart below shows.