Expert: Valeria Bednarik, Analyst at Trader College.
Topics to be covered during the session:
- Practical trade
- Applications for short term, intraday, and daily strategies
- Theories
- Different kinds and concept
Who is Valeria Bednarik?
Valeria Bednarik has been an active Forex trader for the last 2 years, specializing in the International Foreign Exchange Market.
She also graduates in the Universidad Catolica del Salvador, in Argentina, as a Public Account, specializing in financials and cost managements. She actually manages an important clients portfolio for IFX Markets, Boston and is an active traders trainer at Trader College LLC, specializing in technical analysis, for the English speaking community.
Session Material:
Triangles
Although this kind of formation is very usual in Forex market charts, they can be quite difficult to analyze, considering two things: first, there is a long discussion about if they are or are not continuation forms, and second, because there are different types to consider, that doesn’t made the job any easier. But what I consider really good about them is that they are quite reliable formations, that let’s us trade with a good rate of probabilities. So, let’s start with the most common ones, their characteristics, and technical issues.
Symmetrical Triangle
A symmetrical triangle is a pattern that occurs in the middle of an uptrend or a downtrend already in progress. Generally don’t mean a trend change, just, let’s say a lateral “rest” in between the existing main trend. To be consider a triangle, you need at least two ascendant relative minimums and two descendent relative maximums that will let you draw two different trend lines. Graphically, will be something like this:
Image 1 - Click on image to enlarge
In this draw you can see the down trend joining points 1 3 and 5, and the up trend 2 4 and 6; notice that point 6 has actually didn’t touch the trend line: that’s the first sign the triangle break is near. See how after breaking the down trend line, currency made a pullback (in fact, it not always occur, but do most of the times) and then, try to o reach the objective, that equals the high of the triangle at point 1. Another interesting thing to take notice, is that triangles generally get break in its 2/3 parts, so you can have a good idea of when it’s going to happen.
Ascending and Descending Triangles
Both are practically the same as a symmetrical triangles, the basic difference is that ascending triangles appear just in bullish trends; it has an up trend line marking points 2 4 6, but points 1 3 5 are a resistance horizontal line. And in the other hand descending triangles appears in down trends, having a down trend line points 2 4 6, and an horizontal support line based on points 1 3 and 5. Check the following draws-
Image 2 - Click on image to enlarge.
Image 3 - Click on image to enlarge.
Flags, wedges and pennants:
These are short-term patterns that usually form during a brief pause in a strongly trending market, that don’t mean a change in the dominant trend. The pattern is characterized by a moderate movement in the opposite direction to the main trend, and their are not as reliable as triangles.
Flags: this figure seems pretty much like a channel, having parallel trend lines but the difference is that the distance in between the two trend lines is quite small, what makes price move from one to other trend line repeatedly, even in the same candle or bar; the formation has an inclination against dominant trend.
Pennants: look much like symmetrical triangles, although they are smaller in size and duration, and usually don’t break in its 2/3 part, but near its end.
Wedges: basically are triangles, but you can see both trend lines are sloping. Mean both runs in the same direction. And as in pennants, price usually reaches its end until the break out.
Graphically, they look like this:
Image 4 - Click on image to enlarge.
Practical trade with triangles
As you know, triangles are quite reliable figures. To trade triangles, you have to pay extra attention to these points:
• As they are continuation figures, you will have to wait till price break in the right direction, meaning following the previous trend; if it breakouts against trend, is a no trade.
• Many times, after breaking, currencies do a pull back to the broken trend line. Pull backs are signals of confirmation, and is what we have to wake for, before entering the trade.
• Although draws mark fixed points like 1 3 5 and 2 4 6, remember, charts are not that straight and perfect. Many times, you will see that the movements between these points occur in waves, or in zig zag formations.
• Another signal of confirmation of the figure, is that volume generally contracts during the pullback and increases on the breakout.
• Always remember, the breakout must happen in between the 50 or 70 % of the figure, the 2/3 of it. If it happens near the end is not a reliable figure, and before that, won’t give you enough points of confirmation.
Image 5 - Click on image to enlarge.
GBPUSD 1 hour chart
In Previous chart, you can see a symmetrical triangle in a one hour chart. As you can see, currency accomplished and passes the defined target. The breakout happens in the right moment (2/3 of the draw) and if you reduce the chart to 30 or 15 minutes, you will see the pullback
Practical trade with flags wedges and pennants
As I say before, these figures are not very reliable. But, they are useful as a trend confirmation; see, if the previous movement was bullish, and then, starts to form one of this figures, we should be patient and wait the end of these formations; if the breakout is bullish too, then we have pretty much changes to go the way trend is showing us. The target, or price objective, will be equal the number of pips that were accomplished in the movement before the formation starts, till the begging of the formation.
Image 6 - Click on image to enlarge.
EurUsd 15 minutes chart
In this chart, you can see a flag in a EURUSD 15 minutes chart. You can see how fast the movement is and how each candle nearly reaches both trend lines; notice the candle open above the upper trend line giving the signal and finally after two 15 minutes candles, see how currency accomplish the target.
Recent Comments