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Any adventure into trading continuation patterns technical analysis be offering must get started from dividing the approaches. The Western and the Japanese method.

They fluctuate in some ways. Moreover, the closing one simplest just lately turned into recognized to the Western global.

But, within the interim, they whole every different. As such, an ideal trader should know them each.

A retail trader’s favourite chart is the candlesticks one. Well, Japanese candlestick tactics be offering some nice continuation patterns.

Furthermore, the Japanese method offers with trend continuation patterns in numerous techniques than the Western one. Not that the Western method is incorrect.

On the opposite. Classic continuation patterns shape the Western technical analysis method.

Even trading theories imagine continuation patterns. The Elliott Waves Theory offers with more than a few triangular formations that signal a trend’s continuation.

Trading Continuation Patterns

In this post, we’ll quilt:

  • Trend continuation patterns generalities
  • Bullish and bearish flags
  • Pennants
  • Main Japanese continuation patterns
  • Wedges as continuation patterns
  • The ascending and descending triangle pattern
  • Triangles as essentially the most vital Elliott Waves pattern

The intention is to cover each the theoretical section and the practical one. We’ll provide a lot of examples of continuation patterns technical analysis provides with clear trading setups.

After this post, simply open a time frame. Anyone you prefer.

Next, pick out a trend. It doesn’t matter whether it is bullish or bearish.

Finally, search for market consolidations. For those market, consolidations constitute not anything however trend continuation patterns.

CONTINUATION PATTERNS GENERALITIES

This is direct because it will get. A continuation pattern displays the trend will move in the similar path.

Or, it’ll resume by the point the consolidation ends. For when the market moves or a trend begins, it won’t move in a direct line.

It takes time to range. This is also on account of a number of reasons.

For example, loss of liquidity. And, few market individuals.

This is going for the Forex market neatly. The Asian session is a session where the prices slightly move.

As such, continuation chart patterns shape lots of the times. It doesn’t imply all the time, however greater than incessantly, the market will consolidate.

Statistically, well over 60% of the time, the market consolidates. Therefore, trend continuation patterns seem.

Another clarification comes from the Elliott Waves Theory. Even in an impulsive wave, Elliott stated, there are two corrections.

However, regardless of the impulsive wave’s path, the corrections finally end up being continuation patterns technical analysis provides.

In simple English, the Forex market forms continuation patterns prior to resuming a trend. Hence, trending prerequisites should exist first.

It builds power earlier than your next step. And when it breaks, the trend resumed.

Both technical analysis approaches (the Western and the Japanese one) have one thing to supply to the technical trader. That is:

  • Clear entries
  • Stop loss
  • Take profit

As such, a Forex retail trader can move by means of, simplest trading trend continuation patterns. Think of it for a minute.

To make a profit on this trade, you won’t want to know all trading theories. Or, ideas. And all indicators.

One method will do the trick. However, grasp it and combine it with a money management strategy. That is if you happen to attempt for the most productive results.

CLASSIC TREND CONTINUATION PATTERNS – THE WESTERN APPROACH

The oldest technical analysis patterns come from the West. Even if time handed, and the way in which we have a look at markets changed, they nonetheless work.

We will say, they stood the test of time. And, for a just right explanation why.

There are such a lot of currency pairs and time frames; you’ll finally end up having a lot of trade setups. Why now not making trading simple as simple may also be?

For a trend continuation pattern to exist, the price action should meet two prerequisites. First, a trend must be in position. And 2nd, a consolidation to be underway.

The approach the price action acts inside the consolidation area, tells us the pattern’s nature. Throughout time, traders checked out all conceivable structures.

However, the Forex market has an ever-changing persona. Therefore, the trading equipment will change too.

BULLISH AND BEARISH FLAGS AS TREND CONTINUATION PATTERNS

As the title suggests, a flag presentations continuity. Bullish and bearish flags constitute continuation patterns. As such, the price breaks upper or decrease after the flag ends.

Despite the overall trust, a flag has 3, now not two portions:

  • The pole
  • The flag
  • And the measured move

Out of the 3, love it or now not, the 3rd one matters essentially the most. It isn’t a part of the flag per se. But, if wrongly interpreted, it’ll result in losses.

As such, traders should imagine it first. Even earlier than trading the flag.

Here’s an instance. The EURUSD pair traveled the entire summer season in a bullish trend. A powerful one.

Continuation Patterns

But, right earlier than the new top, it consolidated for some time. Considering the period of time and the daily chart, the consolidation took a while.

It used to be a consolidation. Because it shaped in a bullish trend, the bias is continuation pattern will apply.

It became a bullish flag. Why bullish? Well, the trend is bullish.

Moreover, the anticipated break is bullish too. Hence, a bullish flag ends with traders purchasing the currency pair. Bullish continuation patterns are long setups.

What are we able to say concerning the flag above? Why the title of a flag?

First, it has a rectangular shape. Hence, the title.

Second, it slopes in opposition to the former trend. Hence, the market consolidates. Trend continuation patterns technical analysis provides, do this.

Third, the price action seems inside of two lines. That’s all we want to determine the model.

CONTINUATION PATTERNS TECHNICAL ANALYSIS – HOW TO TRADE A FLAG

Technical research books all the time display the pole of a flag. Moreover, they name it to be a significant characteristic of it.

It is correct. In this example, what would make the pole of it? Here it’s.

Trend Continuation Patterns

But, the pole additionally represents the measured move. Therefore, one technique to trade a bullish flag is to:

  • Measure its pole
  • Project it from the upper trendline’s break
  • Place a stop loss on the earlier lower swing

The setup seems like this.

Continuation Patterns Technical Analysis

Not unhealthy for a trading setup, right? The risk-reward ratio appears fabulous.

The trend appears wholesome. And, the market breaks upper.

What’s incorrect with the image? Nothing!

That’s how the unique trading setup for such trend continuation patterns must be. Remember?

The trade should have a money management part. Namely, any trade should have a:

  • Stop loss
  • Take profit
  • Risk-reward ratio larger than 1:2, preferably.

But, on this case, the pair stopped rising. It did for some time after which turned. What’s lacking?

Time. To be more actual, the time component.

For when a bullish flag develops, the time factor issues for the measured move. Not simplest that the price should reach the target. But, it must do this in a particular period of time.

Namely, within the time it took the flag to shape. What if time expires? And, the take profit didn’t come?

That’s simple. Just close the trade.

Ascending Triangle Pattern

Back to the EURUSD instance. With the money management strategy in place, we simply wait.

We stay up for time to run out. If the take profit is available in due time, that’s nice.

If now not, that’s nice too! We exit the trade.

This is how one can deal with continuation patterns technical analysis provides.

OTHER WAYS TO TRADE A FLAG

Some traders are impatient. Especially if the flag develop on a period of time like this one.

As such, they draw the 2 traces at the lower time frames. Depicting the flag.

Next, they purchase each and every time the price reaches the lower part of the rectangle. Or, of the flag.

This approach, they make a couple of tens/hundreds of pips to the possible target. However, it is a dangerous method.

It is dangerous since the flag would possibly take its time. In this case, it took moderately little time to consolidate.

But, now not hardly ever, the market merely drifts on and on and on…with out breaking. Patience and self-discipline are key right here.

CLASSIC CONTINUATION PATTERNS – THE ASCENDING TRIANGLE PATTERN

What we introduced previous used to be a bullish flag. However, the foundations and easy methods to trade a bearish one, are similar.

This reciprocity applies to ascending and descending triangles. Such trend continuation patterns incessantly shape within the forex market.

An ascending triangle chart pattern builds force to break. What’s the path? Higher, after all, just like the title suggests.

Ascending Triangle Chart Pattern

Such continuation patterns are so obtrusive, they’re arduous to miss. Even in the event that they form at the daily chart, just like the AUDUSD chart above.

Since 2016 began, the pair jumped upper. Then, for greater than a yr, it formed an ascending triangle.

It used to be so obtrusive; all traders needed to do used to be to buy the dips. Next, to keep watch over the b-d trend line.

Or, at the grey area that displays the triangle’s resistance. For the triangle merely shows price development power to break upper.

And, it did. It is not any surprise it retested the resistance area and bounced. This is an ideal support and resistance play for technical traders.

A descending triangle chart pattern, then again, is the same. Only that it develops in a bearish trend.

Because the market consolidates lots of the occasions, trend continuation patterns like those form incessantly. Therefore, we rather be there to trade them correctly.

OTHER CLASSIC TREND CONTINUATION PATTERNS – THE PENNANT

A pennant is very similar to a flag. However, there’s a catch.

Instead of a rectangular consolidation, the pennant displays a triangle. Typically, it isn’t an ascending triangle chart pattern. But, a symmetrical one.

What does it imply? It simply implies that the 2 trend lines converge, virtually symmetrically, against the similar level.

Descending Triangle Chart Pattern

The technique to trade it’s very similar to a bullish flag. Just practice those regulations, each referring to price and time.

In the forex market, bullish and bearish flags develops more incessantly than pennants. Both are vital continuation patterns technical analysis provides.

Other Classic Continuation Patterns – Wedges

Forex traders know wedges as reversal patterns. They have all of the right to consider so.

In reality, lots of the instances, a falling wedge breaks upper. And, a emerging wedge breaks lower.

Moreover, they act as transparent reversal patterns. They seem on the finish of bearish, respectively bullish trend.

However, in some circumstances, wedges are nice trend continuation patterns. In reality, some of the intriguing continuation patterns technical analysis provides comes from a wedge.

The Elliott Waves Theory has a reputation for this kind of wedge. A running correction.

Continuation Patterns Candlesticks

Check the chart above. A classic emerging wedge forms.

Moreover, it breaks downwards. Everyone is selling.

It proves to be the incorrect move. As it wasn’t a reversal pattern. But, a continuation one.

JAPANESE TREND CONTINUATION PATTERNS

The Japanese method to technical analysis is quite different. Mostly, it displays reversal patterns.

However, some of the tough technical ideas from Japan is a continuation one. And, it’s just a candle. A single candle.

CONTINUATION PATTERNS TECHNICAL ANALYSIS OFFERS – THE DOJI CANDLE

The title is Doji. And, it may be both a reversal or a continuation pattern. In each circumstances, it displays a formidable move will come.

In some way, this is a breakout candle. Think of an ascending triangle, for instance.

The price pushes in opposition to resistance. And, it makes a sequence of higher lows. Eventually, the breakout comes. The resistance breaks.

It is identical with the Bollinger Bands indicator. Before a breakout, the bands contract.

A doji displays an identical prerequisites. Before a break, the range narrows. The candle turns into smaller, and smaller till it breaks.

A doji candle is among the maximum tough continuation patterns candlesticks can be offering. It is rather unusual if you happen to recall to mind the truth that one candle has such a power on trend continuation patterns.

Descending Triangle Pattern

The chart above displays 3 puts the place doji candles appeared. In all circumstances, the price broke upper.

A doji candle additionally displays uncertainty. It would possibly finally end up being a reversal pattern.

As such, traders position a pending order to buy a break. In this example, a pending buy stop order above the doji candles.

But, as a result of a doji candle has this kind of small body, it doesn’t make sense to place the stop on the lows. In the Forex market, that’s an identical with being stopped.

While a doji is among the maximum robust continuation patterns, the stop must be positioned at the earlier swing. Therefore, traders keep protected for wild swings destined to trigger stops.

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