So far, we have taught you many graphic patterns.

In this lesson we will discuss a little more about how to use these graphic patterns so that you can use them to your advantage!

It is not enough to just know how tools work, we have to learn how to use them. And given all these new weapons in your arsenal of technical analysis, it’s better to burn the profits!

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Let’s summarize the graph patterns we have learned and categorize them according to the signals they give.

Reverse graphic patterns

Reversal patterns are those structures and graphical arrangements that show that the current trend is changing direction.

If a reversal chart is formed during the uptrend, it indicates that the trend will reverse and the price will fall soon.

Conversely, if a reversal chart is observed during the downtrend, it indicates that the price will rise later.

In this lesson, we discussed the six diagram patterns that return signals provide. Can you name all six of them?

1. Twin roof
2. Twin floors
3. Head and shoulders
4. Head and shoulders inverted
5. Incremental wedge
6. Reducing wedge

If you learned all six things correctly .., one like you!

 

Identify the three main groups of graph patterns

To trade these chart patterns, just place an order above the neckline and in the direction of the new trend. Then set the gain limit value that is approximately equal to the height of the structure.

For example, if you see a twin floor, place a purchase order above the structural neckline and set a goal that is as high as the distance from the floor to the neckline.

In order to manage risk properly, do not forget to limit your losses! A reasonable loss limit can be set in the middle of the graph structure.

For example, you can measure the distance between two floors from the neckline, divide it in two, and use it as your loss limit.

Continuous graphic patterns

Continuing graphic patterns are those graphical constructs that indicate that the current trend continues.

These are also commonly known as patterns of stability because they show how buyers or sellers first take a quick break and then continue moving in the same direction as before.

Trends usually do not move in a straight line up or down. They pause and move to the side, make “corrective” movements up or down, and then regain momentum or momentum to continue the overall process.

We discussed several continuing diagram patterns, namely wedges, rectangles, and flags. Note that the wedge or cottage can be a reversible or continuous pattern depending on the process it forms.

 

Identify the three main groups of graph patterns

To trade these patterns, just place an order at the top or bottom of the structure (depending on the direction of the current trend, of course).

Then set a goal that is at least as large as the graph pattern for wedges and rectangles.

For flags, you can aim higher and increase the height of the flagpole.

For continuing patterns, the loss limits are usually at the top or bottom of the current chart.

For example, in a downward rectangle trade, set your loss limit a few pips above the rectangular ceiling or resistance.

Neutral or two-sided graphic patterns

Two-way chart patterns are a bit of a concern because they show that the price can move in any direction.

John? What kind of signal is this ?!

Signal from both sides.

This is where triangular arrangements come in. Remember when we said that in a price triangle it can break from the ceiling or from the floor?

 

Identify the three main groups of graph patterns

To trade these chart patterns, you need to consider both scenarios (break up or down) and place one order on the roof of the structure and the other on the floor of the structure.

If one order is activated, you can cancel another order. Either way the price goes in any direction, you can be part of the operation.

Double the possibilities and possibilities, so double the fun and excitement!

The only problem with this method is that if you place your incoming orders too close to the ceiling or too close to the floor of the structure, you may fall into the trap of a  false or fake failure  .

So be careful and do not forget to set your own losses!

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