Symmetrical triangles are chart formations where the slope of the price’s highs and the

slope of the price’s lows converge together to a point where it looks like a triangle

- market is making lower highs and higher lows

- means that neither the buyers nor the sellers are pushing the price far enough to make a
clear trend - If this was a battle between the buyers and sellers, then this would be a draw -
Its called consolidation

- We don’t know what direction the breakout will be, but we do know that the market will
break out. Eventually, one side of the market will give in.

So how can we take advantage of this? Simple. We can place entry orders above the slope of
the lower highs and below the slope of the higher lows.  Since we already know that the
price is going to break out, we can just hitch a ride in whatever direction the market moves. 

In this example, if we placed an entry order above the slope of the lower highs, we would’ve
been taken along for a nice ride up. If you had placed another entry order below the slope of
the higher lows, then you would cancel it as soon as the first order was hit.
Ascending Triangles - occurs when there is a resistance level and a slope of higher lows

In the chart above, you can see that the buyers are starting to gain strength because they
are making higher lows. They keep putting pressure on that resistance level and as a result, a
breakout is bound to happen. Now the question is, “Which direction will it go? - Will the
buyers be able to break that level or will the resistance be too strong?”

Most of the time the price will in fact go up. The point we are trying to make is that we do
not care which direction the price goes, but we want to be ready for a movement in EITHER
direction. In this case, we would set an entry order above the resistance line and below the
slope of the higher lows.
Descending Triangles - Opposite of ascending triangles
Double Top
A double top is a reversal pattern that is formed after there is an extended move up.
The “tops” are peaks which are formed when the price hits a certain level that can’t be
broken. After hitting this level, the price will bounce off it slightly, but then return
back to test the level again. If the price bounces off of that level again, then you have
a DOUBLE top!
In the chart above you can see that two peaks or “tops” were formed after a strong
move up. Notice how the 2nd top was not able to break the high of the 1st top. This is
a strong sign that a reversal is going to occur because it is telling us that the buying
pressure is just about finished.

With double tops, we would place our entry order below the neckline because we are
anticipating a reversal of the uptrend.
Wow! We must be psychic or something because we always seem to be right!
Looking at the chart you can see that the price breaks the neckline and makes a nice
move down. Remember, double tops are a trend reversal formation. You’ll want to
look for these after there is a strong uptrend.

Double Bottom
Double bottoms are also trend reversal formations, but this time we are looking to go
long instead of short. These formations occur after extended downtrends when two
valleys or “bottoms” have been formed.
You can see from the chart above that after the previous downtrend, the price formed
two valleys because it wasn’t able to go below a certain level. Notice how the 2nd
bottom wasn’t able to significantly break the 1st bottom.

This is a sign that the selling pressure is about finished, and that a reversal is about to
occur. In this situation, we would place an entry order above the neckline.

Would you look at that!

The price breaks the neckline and makes a nice move up. Remember, just like double
tops, double bottoms are also trend reversal formations. You’ll want to look for these
after a strong downtrend.

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. In my experience, when the slope is down, it
produces a more reliable signal.

In this example, we can visibly see the head and shoulders pattern. The head is the
2nd peak and is the highest point in the pattern. The two shoulders also form peaks
but do not exceed the height of the head.

With this formation, we look to make an entry order below the neckline. We can also
calculate a target by measuring the high point of the head to the neckline. This
distance is approximately how far the price will move after it breaks the neckline.
You can see that once the price goes below the neckline it makes a move that is about
the size of the distance between the head and the neckline.

Reverse Head and Shoulders

The name speaks for itself. It is basically a head and shoulders formation, except this
time it’s in reverse. A valley is formed (shoulder), followed by an even lower valley
(head), and then another higher valley (shoulder). These formations occur after
extended downward movements.
Here you can see that this is just like a head and shoulders pattern, but it’s flipped
upside down. With this formation, we would place a long entry order above the
neckline. Our target is calculated just like the head and shoulders pattern. Measure the
distance between the head and the neckline, and that is approximately the distance
that the price will move after it breaks the neckline.

You can see that the price moved up nicely after it broke the neckline. WE know
you’re thinking to yourself, “the price kept moving even after it reached the target.”
And our response is, “DON”T BE GREEDY!”

If your target is hit, then be happy with your profits. However, there are strategies
where you can lock in some of your profits and still keep your trade open in case the
price continues to move your way. You will learn about those later on in the course.

Summary of Chart Formations

Chart formations are like bazookas because they often create huge explosions on the
chart.

Triangles

Symmetrical triangles 

 Consist of lower highs and higher lows

 Place entry orders above the lower highs and below the higher lows

Ascending triangles

 Consist of higher lows and a resistance line

 It usually means that the price will break the resistance line and go higher but you
should place entry orders on both sides just in case the resistance line is too strong. 
 Place your entry orders above the resistance line and below the higher lows. 

Descending triangles   

 Consist of lower highs and a support line

 Usually mean that the price will break the support line and go lower but you should
place entry orders on both sides just in case the support line is too strong. 
 Place your entry orders above the lower highs and below the support line. 

Trend Reversal formations

Double Top

 Happens after an extended uptrend.

 Formed by 2 peaks that can’t break a certain level. This level becomes a resistance
line. 
 Place our short entry order below the low point of the valley in between the 2
peaks.

Double Bottom

 Happens after an extended downtrend.

 Formed by 2 valleys that can’t break a certain level. This level becomes a support
line. 
 Place our long entry order above the high point of the peak in between the 2
valleys. 
Head and Shoulders

 Happens after an extended uptrend.

 Formed by a peak, followed by a higher peak, and then another lower peak. A
neckline is formed by connecting the low points of the two troughs or “valleys”. 
 Place your short entry order below the neckline.
 We calculate our target by measuring the distance between the high point of the
head and the neckline. This is the approximate distance that the price will move
after it breaks the neckline.   

Reverse Head and Shoulders

 Happens after an extended downtrend.

 Formed by a valley, followed by a lower valley, and then another higher valley. A
neckline is formed by connecting the high points of the 2 peaks. 
 Place your long entry order above the neckline.
 We calculate our target by measuring the distance between the low point of the
head and the neckline. This is the approximate distance that the price will move
after it breaks the neckline.

- Remember the trend is your friend. We don’t like to backstab our friends, so we try our
best to never trade against the trend.

Here are some easy to memorize tips that will help you to make smart pivot point trading
decisions.

* If price at PP, watch for a move back to R1 or S1.

* If price is at R1, expect a move to R2 or back towards PP.

* If price is at S1, expect a move to S2 or back towards PP.

* If price is at R2, expect a move to R3 or back towards R1.

* If price is at S2, expect a move to S3 or back towards S1.

* If there is no significant news to influence the market, price will usually move from P to
S1 or R1.

* If there is significant news to influence the market price may go straight through R1 or
S1 and reach R2 or S2 and even R3 or S3.

* R3 and S3 are a good indication for the maximum range for extremely volatile days but
can be exceeded occasionally.
 * Pivot lines work well in sideways markets as prices will most likely range between the R1
and S1 lines.

* In a strong trend, price will blow through a pivot line and keep going.

- Learn to use pivot points along with other technical analysis tools such candlestick
patterns, MACD crossover, moving average crossovers, Stochastics overbought/oversold
levels. The greater the confirmation, the greater your probability of success!

Pivot points can be used by both breakout traders and range bound traders. RANGE BOUND
traders use pivot points to identify reversal points. BREAKOUT traders use pivot points to
recognize key levels that need to broken for a move to be classified as a real deal breakout.

Pivot point is the primary support/resistance level

- If the pair is nearing an upper resistance level, you could sell the pair and place a tight
protective stop just above the resistance level.