Figures of the technical analysis
You found yourself on the step-by-step guide page on Shapes patterns, which will quickly start trading with good profit.
In different literature it is possible to find a large number of figures who in one way or another describe the market, promising fast and very profitable trade. In this article we will discuss the most profitable of them, which will help you in the trade.
All shapes (graphics models or patterns) can be divided into two groups:
Figures of continuation of a trend.
Let me remind you that in this tutorial we will only consider turning figures.
Before we proceed to the review of reversal figures, we need to specify general provisions that will help us avoid losing:
Any turning figure is formed only after the existence of the preceding movement. Do not look for shape data in the stock market. does not recommend trading in the flute;
The larger the model, the greater the movement after it. Here we mean the height and width of the price model.
Press the "explore" button below to complete the step-by-step guide and explore the "Shape" pattern
Technical analysis figures allow to predict the market visually, and not only with the help of indicators working according to mathematical algorithms. They will be a good addition to Japanese candles as they were used before graphical analysis became available to western brokers.
As in candles, all technical graphic patterns of Price Action are divided into reversal figures, indicating a rapid change in the direction of price movement and continuation when the current trend line continues after a pause. Among these are both rarely encountered, such as "Diamond," and requiring experience for proper interpretation (Gartley and Pesavento 's "butterflies"). We will consider simple and common figures of technical analysis, which can be found and profitable to work even beginners.
The turning figure of Head-Shoulders technical analysis is quite often a pattern of three consecutive local price highs. The middle of these and the highest are called "head," and the two side smaller "shoulders." A support line called a "neck" is drawn between lows.
The process of shaping a shape is as follows:
The beginning of the ascending trend.
The left (first shoulder) gives the first local maximum. Then there is decrease to the first point of neck, which together with falling volumes gives the first signal of reduction of pressure of bulls to market.
The head gives the second maximum, which must be higher than the first - the trend resumes, the first correction is finished.
The right shoulder should ideally be symmetrical to the left, which is hardly found in the real market. If it is larger it further confirms the end of the upward movement and it is possible to start waiting for the entry point on the neckline.
The price benchmark is the assumed level of Take Profit when working out the figure of technical analysis and is equal to the value of the right shoulder. However, it is only a benchmark and it is necessary to look at the current situation and other indicators.
For the falling market there is a reverse option - inverted "Head-Shoulders" giving a start to a new upward movement.
Features of working off:
It is formed long enough, and time frames are recommended not lower than the hour.
Dynamics of market volume change is the main confirming signal of the formation process. From the left shoulder to the head level - volumes should grow, respectively decrease after the head. At the level of neck crossing, volumes are beginning to increase again.
The main error of beginners when using figures in technical analysis is entering the market before confirming the crossing of the support line. This rule must necessarily be observed, as it is not uncommon for "Head-Shoulders" to be built where it is not in fact. Do not go on the occasion of your own fantasies, wait for the puncture and confirmation of the signal by other indicators.
Threefold top / Threefold bottom
In its structure, represents the development of the previous figure and also signals a high probability of a near trend reversal.
The ascending "Triple Vertices" are formed as follows:
After punching the resistance level, which becomes the support level (neck) for the future pattern, the price goes up and gives a new high A on which buyers cannot establish themselves, and the first correction begins.
The first correction usually takes place at the moment of new accumulation of forces to continue the trend and when this happens, the trend resumes and gives the next maximum C. On it there is a record of profit and a Stop Loss of small and medium-sized players, the price starts the second correction again to the support line.
Having removed small players from the market, large market makers move the market up again to their Take Profit at point E, after which they leave the market, and the price goes down sharply, starting a new trend.
The figure of technical analysis "Triple Bottom" is formed in a mirror and gives a start to a new upward movement. In classic embodiments, in both cases the neckline will be parallel to the line connecting all three vertices or bases (bottom). With its break, trading volumes begin to grow rapidly, as participants in the previous trend try to get out as quickly as possible.
Overall volume dynamics for both figures: rising to the first top (decline), then falling at the second and third highs, especially at the last downward move. And as mentioned above, the reverse of the sharp increase in pi break support.
Triple Bottom/Top technical analysis figures provide a more reliable reversal signal than Double and Head-Shoulders. Yes, they form for a long time, are unstable on timeframes less than an hour and hardly meet in perfect form. However, if their appearance is confirmed by indicators, especially divergences on the RSI and MACD indicator can be calmly entered into the market.
Entry is recommended after 1-2 support tests and the subsequent actual breakout begins. Take Profit is at least half the distance to the last vertex, Stop Loss is behind it.
This technical analysis figure refers to a group of trend continuation figures and occurs during periods of temporary market uncertainty, after which the price is highly likely to continue the initial movement.
Ascending. The final top is directed upwards, the upper side at closing prices is as horizontal as possible and acts as resistance, the lower side also at closing prices is directed at an upward angle and will be support. The amplitude of the price oscillations between them gradually decreases. It is believed that the uptrend triangle confirms the continuation of the uptrend by punching the upper bound and it will be reasonable to set a deferred purchase warrant over it.
Descending. Reverse figure of technical analysis: the vertex is directed downwards, the lower horizontal will be the resistance, the upper descending support. Both are also on the closing price, the price amplitude is falling. The downtrend should break the lower bound beyond which the deferred sales order.
Symmetric. It belongs to the category of neutral figures with narrowing support/resistance boundaries. It is found quite often and indicates a temporary balance of power between buyers and sellers. The same probability of breaking both borders, but the preferred one will still be a test towards the original movement. It is possible to risk and install two opposite deferred warrants outside the boundaries of the technical analysis figure, but it is necessary to constantly monitor the situation in order to move or remove the unworked warrant in time. In addition, the risk of getting into the "castle," from which beginners will be difficult to get out
Extending. Lines diverge, indicating the presence of significant market overbooking/oversupply when major players suspended trading to sort out the situation and decide where to move on. The rest, taking advantage of the situation, begin to speculatively rock the price and even a small additional volume can cause sharp and unpredictable movements in any of the figures in technical analysis. The boundary break must necessarily be confirmed by other trade instruments.
Recommendations about working off:
The most likely area of breakdown is from the middle to the horizontal side.
Inside there must be an odd number of waves, but not less than 5 otherwise the triangle is not considered formed.
As the pace of price movement decreases, so should volumes with sharp increases around the moment of breakdown. Watch the dynamics, there can be ahead signals!
A trial in the opposite direction from the original movement is likely to be false.
Trading within this technical analysis figure is very risky.
"Flag" and "Pennant"
Also signals the continuation of the trend after a pause. As a rule, before the appearance there is an impulsive rise or fall in the price, accompanied by large volumes. In addition, this figure of technical analysis indicates that the current movement is ahead of the influence of the nearest fundamental factors, and the market is moving to a state of rest before the next severe shock.
Round top / bottom
Example of a long-term turning figure of a technical analysis. Usually beginners prefer faster deals, but it is recommended to pay attention periodically to senior timeframes. The emergence of such figures, apart from quiet earnings, provides an opportunity to see in advance trends that will affect smaller gaps in the near future.
In terms of the market situation, this means that there is a steady change in the trend with the accumulation of deferred positions of large players, which will be worked out in the next 2-3 months.
Such figures are very "slow" and best formed on day and week charts, with low and medium volatility without speculative price impulses. Many techniques have been developed to estimate the strength of the trend, but the simplest will be Fibonacci levels for which, given the large time frame, it is possible to accurately determine future levels of corrections, support/resistance. They can then be used as a basis for evaluating a smaller order technical analysis figure.
Trading on figures of technical analysis it is always necessary to remember its basic principle - it is impossible to make decisions on only one instrument without additional confirmation. With regard to visual reading of the market, this means that it is necessary to look at current pork patterns in addition to builds on price highs/lows. They can both confirm and cancel even the ideal builds described in this article.