There are a lot of price action patterns:
wedges, channels, flags, cup & handle, etc.
If you're just starting out your Forex journey, it's natural to wonder which one to trade and focus on.
In this article, I will show you the best price action pattern for beginners that you need to start forex trading. I will share a complete trading strategy with entry, stop and target, real market examples and useful trading tips. High accuracy and big profits guaranteed.
The pattern that we will discuss is a reversal pattern.
Depending on the shape of the pattern, it can be applied to predict a bearish or a bullish reversal.
Its bearish variation has a very particular shape.
It has 4 essential elements that make this pattern so unique:
A strong bullish impulse,
A pullback and a formation of a higher low,
One more bullish impulse with a formation of an equal high,
A pullback to the level of the last higher low.
Such a pattern will be called a double top pattern.
2 equal highs will be called the tops,
the level of the higher low will be called a neckline.
Remember that the formation of a double top pattern is not a signal to sell. It is a warning sign. The pattern by itself simply signifies a consolidation and local market equilibrium.
Your confirmation will be a breakout of the neckline of the pattern.
Its violation is an important sign of strength of the sellers and increases the probabilities that the market will drop.
Once you spotted a breakout of a neckline of a double top pattern,
the best and the safest entry will be on a retest of a broken neckline.
Target level will be based on the closest support.
Stop loss will lie above the tops.
A bullish variation of a double top pattern is called a double bottom.
It is also based on 4 main elements:
A strong bearish impulse,
A pullback and a formation of a lower high,
One more bearish impulse with a formation of an equal low,
A pullback to the level of the last lower high.
2 equal lows will be called the bottoms,
the level of the lower high will be called a neckline.
The formation of a double bottom pattern is not a signal to buy. It is a warning sign. The pattern by itself simply signifies a consolidation and local market equilibrium.
Your confirmation will be a breakout of the neckline of the pattern.
Once you spotted a breakout of a neckline of a double bottom pattern,
the best and the safest entry will be on a retest of a broken neckline.
Target level will be based on the closest resistance.
Stop loss will lie below the bottoms.
Double top & bottom is a classic price action pattern that everyone knows. Being very simple to recognize, its neckline violation provides a very accurate trading signal.
Moreover, once you learn to recognize and trade this pattern, it will be very easy for you to master more advanced price action patterns like head and shoulders or triangle.
