Forex chart patterns are special formations based on the currencies’ price movements. A chart pattern is formed by common lines or points through which lows, highs and closing prices may be connected.
The bellow mentioned chart patterns enter in the group of most popular chart patterns which occur regularly and simplify the trade.
Descending Triangle: Descending Triangle is a bearish pattern which is formed by the convergence of an upper trend. The latter in its turn is formed by lower highs and a lower horizontal trend line formed by the lows of the candlesticks. It is also important to stress that besides the descending triangle there exist symmetrical and ascending triangles too which have their own with formation and interpretation.
The Wedge: The wedge is formed by connecting the highs and lows of the candlesticks, which converge to produce a pattern. The two variations of the wedge pattern form the rising wedge and falling wedge. The first one, that is the rising wedge, represents bearish reversal pattern where the lower trend line forms sharper slope than the upper one. Consequently, the second one, the falling wedge, presents a bullish reversal pattern where the upper trend line forms sharper slope than the lower trend line
Head and Shoulders: This chart pattern is formed when the trend line connecting the highs of the candlesticks creates three peaks and two troughs. The first peak is followed by a trough, then by a second peak higher than the first peak. The second peak in its turn is followed by another trough almost equal to the level of the first one, then by a third peak which is not so high as the second peak and may be at the same level as the first peak. The horizontal line drawn between lows of the two troughs forms a neckline. The head and shoulders pattern after an uptrend can be a topping formation and a bottoming formation after a downtrend.
Double Tops: This bearish reversal pattern is formed by a trough placed between two successive peaks. The peaks are nearly at almost the same level. Here the trough forms a temporary support whereas horizontal line drawn at this point forms the neckline.
There exist other patterns as well, which help traders to perform their trading activities.