Forex Trading

Head and Shoulders

A head and shoulders pattern is also a trend reversal formation.

It is formed by a peak (shoulder), followed by a higher peak (head), and then another lower peak (shoulder). A “neckline” is drawn by connecting the lowest points of the two troughs. The slope of this line can either be up or down. Typically, when the slope is down, it produces a more reliable signal.

Technical Analysis

Technical analysis is a tool or method, used to predict the probable future price movement of a security – such as a stock or currency pair – based on market data. The theory behind the validity of technical analysis is the notion that the collective actions – buying and selling – of all the participants in the market accurately reflect all relevant information pertaining to a traded security, and therefore, continually assign a fair market value to the security.

Double Top and Bottom

Double top and bottom patterns are chart patterns that occur when the underlying investment moves in a similar pattern to the letter "W" (double bottom) or "M" (double top). Double top and bottom analysis is used in technical analysis to explain movements in a security or other investment, and can be used as part of a trading strategy to exploit recurring patterns.

Break of the Long-term Trendline

There are times when the market respects an important trendline and if it breaks, it’s a sign that the buyers are getting weak. So what you’ve learned earlier are “analysis” techniques to help you analyze when a trend will reverse. if you see the market suddenly reverse, chances are, it came into a higher timeframe structure (like Support or Resistance) and reverse from it. 

And this can be useful for two reasons:

• You can find high probability reversal areas based on the higher timeframe structure
• You can avoid poor setups that trade directly into higher timeframe structure

Breakouts

A breakout is a stock price moving outside a defined support or resistance level with increased volume. Breakouts occur in all types of market environments. Typically, the most explosive price movements are a result of channel breakouts and price pattern breakouts such as triangles, flags, or head and shoulders patterns. A breakout is a potential trading opportunity that occurs when an asset's price moves above a resistance level or moves below a support level on increasing volume. The first step in trading breakouts is to identify current price trend patterns along with support and resistance levels in order to plan possible entry and exit points.

Once you've acted on a breakout strategy, know when to cut your losses and re-assess the situation if the breakout sputters. As with any technical trading strategy, don't let emotions get the better of you. Stick with your plan and know when to get in and get out.