Chart patterns are a crucial part of the Forex technical analysis. Patterns are born out of price fluctuations, and they each represent chart figures with their own meanings. Each chart pattern indicator has a specific trading potential. As a result, Forex traders spot chart patterns to profit from the expected price moves. There are three types of chart pattern figures in Forex based on the price movement. Chart patterns can be categorized as reversal chart patterns, continuation chart patterns and bilateral chart patterns.

Reversal Chart Patterns

Reversal chart patterns are graph patterns that show a reversal of direction from the previous direction. If before reversal chart patterns occur, price movements indicate a downtrend, then it is likely that after this pattern is formed, prices will tend to move up (uptrend). Likewise, vice versa if before forming a reversal chart patterns of price movements indicate an uptrend (uptrend), then it is likely that after this pattern is formed the price will move tends to go down (downtrend).

 

Continuation Chart Patterns

A pattern that shows that the previous price movement is an uptrend or downtrend will continue after the end of continuation chart patterns. And usually this pattern is also referred to as a consolidation pattern which indicates that a seller’s trader or buyer takes over the position quickly to resume the previous movement. Some of the patterns that fall into this category are pennants, wedges, and rectangles. It should be noted that the wedge pattern is also considered a reversal pattern depending on the pattern they form.

 

Bilateral Chart Patterns

This chart patterns show two possibilities, namely continuing the previous pattern or moving in opposite directions. Chart patterns that fall into this category are the triangle chart patterns both symmetrical chart patterns, ascending chart patterns, and descending chart patterns. Trading with bilateral chart patterns can be done by assuming that both directions will be formed so that two positions are open. If one position is hit, then the other position in cancel, the wrong position.