In this educational articles, I will teach you the best price action patterns for Trend-Following Trading Forex.
📍Ascending & Descending Triangles
The ascending triangle will be considered to be a trend-following pattern if the impulse leg preceding the formation of the pattern is bullish.
The pattern consist of 2 main elements:
a horizontal neckline based on the equal highs,
a rising trend line based on the higher lows.
❗️The trigger is a bullish breakout of a neckline of the pattern and candle close above.
📈The position is opened on a retest.
🔴Stop loss is lying at least below the level of the last higher low.
🎯Take profit is the next historical resistance.
Look at an ascending triangle formation on EURUSD on an hourly time frame.
On the left, you can see the structure of the pattern and on the right, the trading plan.
📍The descending triangle will be considered to be a trend-following pattern if the impulse leg preceding the formation of the pattern is bearish.
The pattern consist of 2 main elements:
a horizontal neckline based on the equal lows,
a falling trend line based on the lower highs.
❗️The trigger is a bearish breakout of a neckline of the pattern and candle close below.
📉The position is opened on a retest.
🔴Stop loss is lying at least above the level of the last lower high.
🎯Take profit is the next historical support.
Above is a perfect descending triangle pattern that I spotted on GBPUSD on a 4H time frame.
📍Bullish & Bearish Wedges
The bullish wedge pattern will be considered to be a trend-following pattern if the impulse leg preceding the formation of the pattern is bullish and the pattern is directed to the downside.
The pattern consist of 2 contracting falling trend lines based on the lower lows and lower highs.
❗️The trigger is a bullish breakout of a resistance of the pattern and candle close above.
📈The position is opened on a retest.
🔴Stop loss is lying below the low of the pattern.
🎯Take profit is the high of the pattern.
Above is a falling wedge pattern that I found on GBPUSD.
The pattern is formed after a strong bullish impulse.
A trigger to buy is a bullish breakout of its resistance.
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The bearish wedge pattern will be considered to be a trend-following pattern if the impulse leg preceding the formation of the pattern is bearish and the pattern is directed to the upside.
The pattern consist of 2 contracting rising trend lines based on the higher highs and higher lows.
❗️The trigger is a bearish breakout of a support of the pattern and candle close below.
📉The position is opened on a retest.
🔴Stop loss is lying above the high of the pattern.
🎯Take profit is the low of the pattern.
To correctly sell this rising wedge pattern on EURUSD, we should wait for a breakout of its horizontal support and then sell the market on its retest.
📍Bullish & Bearish Flags
The bullish flag pattern will be considered to be a trend-following pattern if the impulse leg preceding the formation of the pattern is bullish and the pattern is directed to the downside.
The pattern consist of 2 parallel falling trend lines based on the lower lows and lower highs.
❗️The trigger is a bullish breakout of a resistance of the pattern and candle close above.
📈The position is opened on a retest.
🔴Stop loss is lying below the low of the pattern.
🎯Take profit is the high of the pattern.
Above, you can see a perfect example of a bullish flag pattern on EURUSD on a 4H time frame and its trading strategy.
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The bearish flag pattern will be considered to be a trend-following pattern if the impulse leg preceding the formation of the pattern is bearish and the pattern is directed to the upside.
The pattern consist of 2 parallel rising trend lines based on the higher highs and higher lows.
❗️The trigger is a bearish breakout of a support of the pattern and candle close below.
📉The position is opened on a retest.
🔴Stop loss is lying above the high of the pattern.
🎯Take profit is the low of the pattern.
Above is a bearish flag pattern on GBPUSD and a full plan to sell the market based on it.
📍Bullish & Bearish Symmetrical Triangles
The bullish symmetrical triangle will be considered to be a trend-following pattern if the impulse leg preceding the formation of the pattern is bullish.
The pattern consist of 2 contracting symmetrical trend lines based on the higher lows and lower highs.
❗️The trigger is a bullish breakout of a resistance of the pattern and candle close above.
📈The position is opened on a retest.
🔴Stop loss is lying at least below the last higher low of the pattern.
🎯Take profit is the high of the pattern.
This bullish symmetrical triangle on EURUSD on an hourly time frame is a perfect example of a bullish trend-following pattern.
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The bearish symmetrical triangle will be considered to be a trend-following pattern if the impulse leg preceding the formation of the pattern is bearish.
The pattern consist of 2 contracting symmetrical trend lines based on the higher lows and lower highs.
❗️The trigger is a bearish breakout of a support of the pattern and candle close below.
📉The position is opened on a retest.
🔴Stop loss is lying at least above the last lower high of the pattern.
🎯Take profit is the low of the pattern.
On the left chart, you can see a structure of a valid symmetrical triangle.
On the right chart, you can see how to trade it properly.
The main difficulty related to trading these patterns is their recognition. You should train your eyes to recognize them on a price chart.
Once you learn to do that, I guarantee you that you will make tons of money trading them.
