Forex Market Patterns

Forex Market Patterns

# Forex for beginners , # Forex for dummies

On the Forex market, there are several patterns that allow you to predict the price movement in one direction or another. Forex patterns are often repeated events that cause a similar course reaction. Almost all of them are based on the postulates of Charles Dow:

  • The price moves along the trend until a clear, unambiguous signal appears to change the trend;
  • History repeats itself;
  • Each trend has three phases.

Based on these postulates, several characteristic patterns of the Forex market were identified, which should be considered by each trader:

The strength of the trend directly affects the likelihood of its reversal. Moreover, the strength of the trend depends on supply and demand and takes into account trading volumes.

The flat state is replaced by a sharp price movement. Often this is due to the release of significant news.

The market cannot be in the same state for a long time. The price is constantly moving to the overbought or oversold zone. This helps to find entry points to the deal.

Session time factor. The trader must consider during which session he is trading. The most liquid are the American and European sessions. It is on them that price-backed movements occur. During the Asian session, the price of instruments changes to a lesser extent and often without significant support by trade volumes, that is, without long-term consolidation as a trend. The Asian session is also more focused on local currencies.

Price always fills the gap. During weekends and holidays, price gaps (gaps) sometimes arise when the closing and opening prices differ sharply. Often this happens as a result of the release of important news during this period. As a rule, price gaps are formed in the stock market due to the limited trading time of stock market instruments and the low liquidity of some instruments. In this case, no matter which direction the trend is directed, the price is most likely to fill the gap.

A sharp price movement necessarily follows a rollback (correction). Moreover, the stronger and longer the movement, the stronger the correction. This situation can often be observed with the release of important news.

Price moves in a certain range. Price, as a rule, moves in certain ranges and forms a price channel. Price movement is often limited by significant highs and lows. The more often the price approached them from one side or the other, the more likely it was to push off from them.

Excessively high volatility always causes a broker spread increase. Often this situation is observed before large holidays or weekends, as well as with low liquidity for the instrument. Sometimes an increase in the spread is observed at night.

The market necessarily takes into account forecasts and expectations. Waiting for news also affects the course as well as the output of the news itself. Therefore, the price will move in the direction where the forecast indicates. A sharp change in movement is possible if the forecast and the actual data do not match.

Seasonal fluctuations. Exchange rates are subject to seasonal trends. Therefore, the movement of the course can be predicted by the behavior of the instrument in the same month of the previous year. Often this pattern is used when trading on Non-Farm payrolls.

Patterns of the Forex market serve as a signal not only for opening deals, but also for closing them. For example, when trading on the news, you must take into account the mandatory corrective movement of the market.

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Total 87 materials
  • Forex Indicators (56)
  • # Forex Strategies (36)
  • # Earnings on Forex (35)
  • # Practical Forex (23)
  • # Forex for beginners (19)
  • # Forex for dummies (16)
  • # Technical analysis (11)
  • #Trading (6)
  • # History of world currencies (5)
  • # Forex Brokers (2)
  • # Fundamental analysis (2)
  • #CFD (1)

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1. The risk of loss to an individual as a result of changes in foreign exchange rates (currency risk).

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