29 Chart Patterns Cheat Sheet - ForexBee
29 Chart Patterns Cheat Sheet - ForexBee
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Introduction
In the chart patterns cheat sheet, 29 chart patterns have been explained by expert trader.
These patterns have a high winning ratio because we have added proper confluences to
each pattern to increase the probability of winning in trading.
You can also learn each pattern in detail by clicking the learn more button below each
chart pattern.
Types
Chart patterns are divided into two main categories:
1. Reversal Patterns: These patterns suggest that a current trend is likely to reverse
or change direction.
2. Continuation Patterns: These patterns suggest that the current trend is likely to
continue after a brief consolidation or pause.
Bullish Megaphone: This variant forms when the price action breaks above the upper
boundary of the expanding channel. Traders often look for entry opportunities at the
completion of the fifth swing, anticipating a continuation of the uptrend.
Bearish Megaphone: The bearish counterpart emerges when prices fall below the lower
trendline of the formation, suggesting a potential downward move. This offers a cue for a
short position at the breakdown point following the fifth swing.
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Trend Continuation Rectangle: This type forms during an ongoing bullish trend and
signals that the trend is likely to resume after a period of consolidation. It is characterized
by a series of equal highs and lows. Traders consider this a high-probability setup due to
its alignment with the existing bullish momentum.
Trend Reversal Rectangle: Occurs after a downtrend and suggests a potential reversal
to an upward trend. This pattern can be more challenging to trade due to the possibility of
false breakouts and requires careful confirmation, typically through a significant bullish
candlestick breakout, to validate the change in market sentiment.
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Types
Bullish Bump and Run: Occurs after a bearish bump phase, indicating a bullish trend
reversal. The price breaks above the trendline established during the bump phase,
signaling the start of a new upward trend.
Bearish Bump and Run: Follows a bullish bump phase and signals a bearish trend
reversal. The price breaks below the trendline, suggesting a downward price movement is
imminent.
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Identification:
Starting Point: Begin by identifying a bullish trend that leads into the pattern,
setting the stage for a potential reversal.
Higher Highs and Higher Lows: Look for price action making progressively
higher highs and higher lows, indicative of an expanding wedge.
Trendlines: Draw two diverging trendlines that connect the series of higher highs
(resistance) and higher lows (support), outlining the broadening structure of the
wedge.
Wave Size: Each successive wave within the pattern should be larger than the
previous, emphasizing the expanding nature of the wedge.
Minimum Waves: Ensure that there are at least three identifiable waves within the
pattern to confirm its validity.
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Identification:
Starting Point: Look for a bearish trend leading into the pattern, which sets the
context for the potential bullish reversal.
Lower Lows and Lower Highs: Identify a series of lower lows and lower highs,
which indicate the expanding nature of the wedge.
Trendlines: Draw two diverging trendlines that connect the lower highs
(resistance) and the lower lows (support), creating the broadening wedge shape.
Wave Expansion: Each successive wave should be larger than the one before,
emphasizing the broadening aspect of the pattern.
Wave Count: Verify that there are at least three distinct waves within the pattern to
confirm its presence on the chart.
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Identification:
Higher Lows: Start by identifying at least three consecutive higher lows, which
form the basis of the ascending channel’s support line.
Parallel Trendlines: Draw a trendline connecting these higher lows, then clone
this trendline and place it at the level of the higher highs to create the channel’s
resistance line.
Trendline Touches: The reliability of an ascending channel increases with the
number of touches or interactions price has with the trendlines. More touches
typically signify a stronger and more significant channel.
Swing Points: To accurately draw the channel, it’s crucial to pinpoint the correct
swing highs and lows. These points are where the trendlines should be anchored.
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Identification:
Lower Lows: Begin by identifying at least three successive lower lows on the
chart, which will form the basis of the descending channel’s support line.
Parallel Trendlines: Draw a trendline through these lower lows, then replicate this
trendline to align with the lower highs, creating the channel’s resistance line.
Channel Integrity: Ensure that the price action remains within the confines of the
channel, without significant closes outside the channel’s boundaries, to maintain its
validity.
Rejections: A robust descending channel is characterized by numerous rejections
from both the support and resistance lines, indicating the channel’s strength and
relevance.
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8. Trend Channels
Trend channels are graphical representations in forex trading that consist of two parallel
trendlines framing the price action. These channels illustrate the direction and volatility of
market trends, providing a structured view of bullish, bearish, or sideways movements.
Formed by two parallel upward-sloping lines connecting higher highs and higher
lows.
Indicates a bullish market trend, with the upper line serving as resistance and the
lower line as support.
The trend is considered intact until a downward breakout occurs.
Consists of two parallel downward-sloping lines linking lower highs and lower lows.
Signifies a bearish trend, with the upper channel line acting as resistance and the
lower line as support.
The bearish trend is presumed to continue until an upward breakout happens.
Characterized by two horizontal lines that connect the swing highs and lows,
indicating a lack of a clear bullish or bearish trend.
Represents a market in consolidation or a ranging phase, where the price
oscillates between the two horizontal levels.
Trading within a horizontal channel involves anticipating bounces off support and
resistance levels.
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Identification:
Base Formation: The upper side of the triangle, or the base, is formed by a
horizontal resistance line that has been touched by the price at least three times
without a significant breakthrough.
Rising Trendline: The lower side of the triangle is an ascending trendline
connecting at least two higher lows, indicating increasing buying interest with each
price dip.
Swing Waves: The pattern should consist of clear, discernible swing waves, with
each successive low being higher than the previous one, reinforcing the ascending
nature of the lower trendline.
Wave Count: A valid Ascending Triangle pattern should have at least three swing
waves to confirm its presence.
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Identification:
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Identification:
Pole: The pole is formed by a steep, nearly vertical drop in price, representing the
initial impulsive wave of the bearish trend.
Flag: Following the pole, the flag consists of a slight, upward-sloping consolidation
phase, where prices retrace slightly within a narrow price range. This phase is
typically represented by parallel trendlines that slope against the prevailing
downtrend.
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Identification:
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Identification:
Pole: The pole is formed by a sharp, vertical increase in price, representing the
initial impulsive wave of the bullish trend.
Flag: The flag portion is a short, downward-sloping consolidation phase that
follows the pole, often represented by a narrow channel of lower highs and lower
lows.
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Identification:
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Identification:
Preceding Trend: A significant bullish trend should precede the formation of the
Double Top pattern. This establishes the context for a potential trend reversal.
Resistance Zone: The two peaks are formed at a resistance level, where selling
pressure overcomes buying pressure, preventing the price from advancing further.
Confirmation: The pattern is confirmed when the price drops below the support
level, often identified as the neckline, which is drawn at the lowest point between
the two peaks.
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Identification:
Preceding Trend: A Triple Top pattern typically forms after a prolonged bullish
trend, providing the context for a potential reversal.
Equal Peaks: The pattern is defined by three almost equal tops, with each peak
reaching a similar resistance level, indicating strong selling pressure at this price
point.
Resistance Zone: The resistance zone is established by the peaks and is a critical
area where the market has repeatedly failed to push prices higher.
Neckline: The neckline is drawn by connecting the lows between the three peaks.
This line acts as a support level that, once broken, confirms the pattern’s bearish
reversal signal.
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Identification:
BC Retracement: The ‘BC’ wave should retrace to the 61.8% Fibonacci level of
the ‘XA’ wave, indicating a significant pullback but not a complete reversal of the
initial ‘AB’ leg.
CD Extension: The ‘CD’ wave is expected to extend to the 127.2% Fibonacci level
of the ‘BC’ wave, suggesting that the pattern completion and potential reversal
area coincide with significant Fibonacci extension levels.
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Identification:
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Identification:
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Identification:
Formation Stages: The pattern is formed through two distinct phases: the
broadening phase (initial expansion of price range) and the narrowing phase
(subsequent contraction), which together create the diamond shape.
Broadening Pattern: Initially, the market expands with higher highs and lower
lows, resembling a megaphone or a broadening pattern, indicating increasing
volatility and uncertainty.
Narrowing Pattern: Following the broadening phase, the price action contracts
into a narrowing wedge or triangle, signaling a decrease in volatility and the
consolidation of prices.
Diamond Top (Bearish Diamond Pattern): Forms after a prolonged uptrend and signals
a potential reversal to a downtrend. Key identifiers include formation in an overbought
condition and commencement after a bullish impulsive move, without prior sideways
movement.
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Rising Wedge Pattern: A Rising Wedge2 is a bearish reversal pattern that forms during
an uptrend. It is characterized by higher highs and higher lows that converge towards a
point, creating a narrowing, upward-sloping shape.
Falling Wedge Pattern: A Falling Wedge is a bullish reversal pattern that develops during
a downtrend. It features lower highs and lower lows that converge, forming a narrowing,
downward-sloping configuration.
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Structure:
Drive 1: Begins the pattern with an impulsive wave, setting the direction of the
pattern (upward for bullish, downward for bearish).
Retracement of Drive 1: A partial pullback from the initial drive, typically adhering
to specific Fibonacci levels, often around 61.8%.
Drive 2: Mirrors the first drive in magnitude and direction, followed by a similar
retracement.
Drive 3: The final drive, which also resembles the first two in size and direction,
completes the pattern. This drive is often anticipated to reach a Fibonacci
extension of the previous retracement.
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Conversely, the Inverse Head and Shoulders pattern signals a potential reversal from
bearish to bullish, featuring two lower troughs surrounding a deeper central trough.
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Types
Bullish QM pattern:
Bearish QM pattern:
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Types:
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Types:
Dead Cat Bounce: This occurs in a bearish trend where the market momentarily
recovers (bounces) before continuing its downward movement.
Inverted Dead Cat Bounce: The inverse scenario where, after a brief bearish
pullback in a bullish market, prices resume their upward trajectory, though less
common than the traditional dead cat bounce.
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Conclusion
These chart patterns are widely used by retail traders in technical analysis.
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1. How to identify XABCD Pattern Correctly?
Kenneth
June 23, 2024 at 7:07 pm
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