This article looks at the advanced FX rates price patterns that you can find on the market.
There are a number of different FX rates price patterns that you need to know about. Some of the price patterns that you trade on will be more common than others. There are also some advanced patterns that you should consider when you trade the FX rates. These advances price patterns will help you increase the profitability of your trading.
The FX Rates Island Reversal Pattern
The island reversal pattern is a short-term FX rates trading pattern that you should consider. As the name suggests this pattern will indicate that a reversal in the price action is coming. The pattern is very strong and the reversal will come directly after the formation. In fact, the latter part of the pattern actually indicates the change in price action direction.
The formation of the pattern is actually very simple, but many traders have a problem with the identification of the pattern. The first part of the pattern will be the directional movement. These will be a reversal candlestick then which is followed by a gap between the next two candlesticks. This price pattern can be used as an entry and an exit signal.
The Three Gaps Pattern
Not all trading patterns will be the point where the reversal in the market happens. There are a number of trading patterns that are considered to be anticipatory patterns which tell about a reversal that will be happening on the future. One of these patterns is the three gap pattern which is also known as the San-Ku pattern.
This pattern is formed in a strong directional movement on the market. To form the pattern you will need to look at four consecutive candlesticks. There will be a gap between all of the candlestick and this is the pattern formation. The gaps between the candlesticks will be an area where there is no body or wick.
The Kicker Pattern
The kicker pattern is one of the most reliable and strongest patterns that you can find on the candlestick charts. These patterns are defined by the sharp and strong reversal in price action over two candlesticks. The pattern formation will have a directional movement with a sudden two candlestick movement which is a string swing in the opposite direction.
The pattern generally tells you that a turn has come in the market and a new trend has been established. You should consider trading in the direction of the new trend on the market. This pattern is one of the patterns that offer you an immediate reversal in the market and you have to trade accordingly.
The Use of Gaps
Many advanced trading patterns will make use of gaps in the market. When you combine the gaps in the market with the candlesticks you can find some of the best chart patterns to trade on. The patterns will not only be strong in the movement that they represent, but they will also be highly reliable which is something that many other patterns cannot offer. The gap patterns are generally going to be reversal patterns and you have to keep this in mind when you use them to trade.