Besides candlestick patterns, Bullish patterns are also very commonly used. What is the difference between these two models? How are price model groups used by traders in Forex trading? Readers’ questions will be answered through the following article. Let’s take a look at Forex Trading now.
Analyze the differences between Bullish patterns and candlestick patterns
In forex trading, Bullish patterns and candlestick patterns are commonly used. Price patterns in Forex (Price Pattern) originate from the West. This is a form of price chart, simulating market trading sessions over a specific period of time. This pattern is repetitive, helping traders predict fluctuations and price trends.
Candlestick patterns originate from Japan and are a collection of one or more candles. Some models are only used in one trading session. Ichimoku candlestick are powerful tools that help traders identify potential trading signals. From there, make timely and reasonable investment decisions. Through Ichimoku clouds and candlestick patterns, traders can also identify resistance-support levels and predict future trends.
There are Japanese candlestick patterns: Hammer, Inverted Hammer, Bullish engulfing, Bearish engulfing, Piercing line, Morning star, Shooting star, Evening star, Hanging man, Three white soldiers, Three black crows, Dark cloud cover, Doji, Spinning top ), Three increasing steps (Rising three method), Three decreasing steps (Falling three method).
When reading 16 Japanese candlestick patterns, traders need to pay attention to the opening price, closing price, candle body, and candle wick. But for price models, you don’t need to pay attention to small details but just focus on price movements.
Notes when using Forex price models
When applying price models, traders should note:
- With the group of price reversal and continuation models: Traders should wait for the price to cross the trendline (the line connecting the tops or bottoms) before entering a trading order. Thanks to that, placing incorrect orders is limited, affecting trading results.
- Should be combined with other technical indicators to produce accurate and quick data and signals.
- Pay attention to updating market fluctuations. Only when the price pattern is clearly and completely formed will you enter an order.
See more: Analyze & forecast trend effective candlestick pattern
Analyze common Bullish pattern groups that traders need to know
There are 3 popular groups of Forex price patterns: Reversal, continuation, and bilateral patterns. Let’s go deeper into each model group with Forex Trading.
Group of price reversal patterns
This group of models signals that the market price trend is about to change. If the pattern is formed in the context of an uptrend, then in the future the price will decrease. If the pattern is formed when the market is trending down, then the price shows signs of increasing again.
The price reversal model group includes the following 6 models:
- Double top pattern.
- Double bottom model.
- Head and shoulders pattern.
- Inverse head and shoulders pattern
- Rising wedge pattern.
- Falling wedge pattern.
For this group of models, traders should place buy/sell orders after the market price breaks the neckline according to the new trend. You can place your stop somewhere in the middle of the price pattern.
Bilateral model group
The group of bilateral price models is relatively complex. Because this is a signal that the market price can move in other ways. Commonly used patterns include ascending triangles, descending triangles, and symmetrical triangles. The trading price can surpass the top or bottom of the pattern.
During the trading process, traders can place 2 orders to catch the trend. In it, an order is placed at the top position of the model. The remaining order is placed at the bottom of the model. If an order is activated, you need to cancel the remaining order. This way helps investors successfully make at least one transaction and earn a profit.
Bullish patterns group – Continuation pattern
This group of patterns is a signal that the market price is continuing to follow the current trend. At this time, prices do not increase/decrease suddenly but stagnate and move sideways. Then continue following the general trend. The continuation model is also known as the accumulation model.
Continuation patterns include Ascending rectangle, descending rectangle, rising wedge, falling wedge, ascending triangle, descending triangle, isosceles triangle, ascending pennant, and descending pennant. For a continuation pattern, you should enter an order above or below the pattern, after the market price has broken out of the pattern. Additionally, stops are usually placed above or below the top/bottom of the pattern.
See more: Discover Exness – The world’s leading Broker
How to apply Bullish patterns in Forex effectively
Below are ways to apply Bullish patterns when trading in the market. Traders can refer to it to make effective investment decisions.
Application of reversal pattern
The head and shoulders model (forward and reverse) is used by many investors. This pattern has the neckline as support. With a positive head and shoulders pattern (shoulder tops and head pointing up), traders should set a take profit level when the market price breaks the neckline. As for the inverted head and shoulders pattern (shoulder tops and head pointing down), traders should choose the disbursement point when the price has surpassed the neckline.
For the double top model, after the market price has just broken the trendline, traders should sell half of the assets they are holding. Then, sell off the remaining assets when the price breaks out of the neckline. This will help you preserve profits.
In the double bottom model, if the price breaks the trendline, the trader creates a 20% buying position. When the price breaks the neckline, traders continue to create a 30% buying position.
Bilateral price model
For the ascending triangle pattern, the order entry point is determined when the pattern has completely formed after the breakout point appears. Ways to enter orders that traders can refer to:
- Place an order at the resistance breakout point.
- Place an order at the time the price retests support.
The time to determine the entry point in the descending triangle model is similar to the ascending triangle. There are 2 ways to place orders you should apply:
- Place a sell order at the support breakout location.
- Place a sell order at the time the price retests resistance.
Apply the continuation price model
For continuation patterns, especially rising/falling wedge patterns, the order entry point is determined after the pattern has been formed (when the breakout point appears). Traders can apply 2 ways to enter orders as follows:
- Place an order right at the breakout point. Note: Resistance breakout point for buy orders, support breakout point for sell orders.
- Place an order at the closing price of the market.
Conclude
Above is the knowledge about Bullish patterns that we want to share with readers. Investors can apply the above model groups to observe price fluctuations and make transactions. To not miss useful information about the Forex market, don’t forget to visit Forex Trading!
FAQs
Below are a few frequently asked questions about Forex price patterns that traders should not ignore.
Advantages and disadvantages of Bullish patterns?
In terms of advantages, this model has an intuitive shape, easy to recognize, easy to observe and apply in transactions. The accuracy of the price model is quite high. Combining the model with other technical indicators, traders can predict the market price and place orders earlier.
However, Forex price models also have some limitations. Only when the pattern is fully formed can you make a trend prediction. A false break may appear. Along with that, the model within the model distracts traders, not know how to properly enter orders.
Are price models the most effective trading tools?
Price model groups are very effective in determining order entry points but are not a prerequisite for influencing market trends. Traders need to combine the model with other technical tools. From there, come up with a reasonable trading method to limit risks and gain profits.
What is a stop in Forex?
Stops are also known as stop loss. This is a type of order used by investors to limit losses at a certain price. There are 2 basic orders: stop loss sell and stop loss buy.
