Rounded Bottoms Chart

This formation has the same characteristics as a rounded top only this time it works in the opposite way and creates a BUY signal. Rounded bottoms are sometimes called Saucers or the Accumulation Period.

All of these patterns indicate that the downward trend is running out of steam and the market is looking to test higher ground once again.

Most experienced traders would be looking to position themselves in this accumulation period, it is called the accumulation stage as that is exactly what is happening, traders are accumulating shares.

A further extension of the rounded bottom is a formation called a Cup. It is basically a completed rounded bottom with a smaller rounded bottom formed on the right hand side thus giving the appearance of a handle for the cup.

Volume should be on the increase as the bottom starts to climb upward.
There should be even larger volumes again during the Handle stage.
























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Rounded Top chart

The formation of a rounded top on a chart is a good indication that the market will look to test Lower ground soon and thus giving us a Sell signal.

It can also be called a saucer or distribution curve and is seen at the end of an upward trend. It shows the market is running out of steam and cannot achieve new highs.

Volumes will start to reduce as the price reaches it's peak and increase as the price starts to fall.

Happy trading

Double Bottoms Chart

Examples of Double Bottoms

Note: Dramatic rise in volumes on second bottom







Double bottoms are identical to double tops except they work in the opposite way and thus create a Buy signal.

Double bottoms basically tell us that the market has tested a price level on two occasions and on both times refused to go Lower.

They can also come in the form of triple and quadruple bottoms.

Volumes on the second bottom should be Greater than the first bottom.
Double bottoms can give an excellent Buy signal and most Technical Traders would act on such a sign.

Double -Tripple Top Charts

This is another powerful pattern that MAY indicate that the market is looking to test Lower levels.
It occurs at the end of a upward trend or market rally.

Double tops basically tell us that the market has tested a price level on two occasions and on both times refused to go higher.

They can also come in the form of triple and quadruple tops.
Volumes on the second top should be lower than the first top.

If you hold a stock that exhibits a double top be ready to liquidate as there is a good chance the market will go lower







TIP
Bar and Candle Charts will give you a better example of double tops than line charts.

Inverse Head and Shoulder

This pattern is identical to the H&S discussed above except it occurs at the end of a downward trend or market sell off. It is made up of the same four components only this time they are acting in reverse and thus give a Buy signal.



The Left Shoulder - The market looks to test lower price levels. Decreasing Volumes. Followed by test of Neckline.

The Head - Market again looks to test lower ground and succeeds with setting a higher price that was set by the Left Shoulder. Steady to slightly increasing Volumes. Followed by test of Neckline.



The Right Shoulder - Once again the market looks to test lower ground but this time fails to achieve the low price set by Head. Increasing Volumes. Again followed by test of the neckline only this time there is a good chance of the Neckline being violated and the market MAY look to test Higher ground.



The Neckline - Is a line that is drawn connecting consecutive Highs. It is a line where the price bounces off and refuses any Higher. It is basically the same as a Resistance Line.


Again most traders who are familiar with this pattern would try to Buy at the bottom of the head but it is a safer way to trade if you wait till confirmation that the Right Shoulder has formed and is looking to test the Neckline once again.

Head & Shoulder Chart

You should now have a basic understanding of Trend Lines and their workings from our first chapter. In this chapter we will discuss some of the patterns that form on the charts that help give a further indication of an impending Trend Reversal.

Once again some of the patterns about to be discussed are very powerful and SHOULD be respected!



Head & Shoulder Pattern
Inverse Head & Shoulder Pattern
Double Tops
Double Bottoms
Rounded Top . Saucers
Rounded Bottoms / Saucers and Cups
Triangles
Flags / Pennants / Wedges


Head & Shoulder Pattern















The Head & Shoulder Pattern has claim to being one of the most reliable of all chart patterns. It is usually formed at the end of an upward trend or market rally and acts as a SELL signal.

There are four main components that make up a H&S pattern and they are :


The Left Shoulder
The Head
The Right Shoulder
The Neckline
















The Left Shoulder - The market looks to test higher price levels. Increasing Volumes. Followed by retracement to neckline.
















The Head - Market again looks to test higher ground and succeeds with setting a higher price that was set by the Left Shoulder. Large Volumes Followed by retracement to neckline.




















The Right Shoulder - Once again the market looks to test higher ground but this time fails to achieve the high price set by Head. Reducing Volumes. Again followed by retracement to neckline only this time there is a good chance of the Neckline being violated and the market MAY look to test Lower ground.




















The Neckline - Is a line that is drawn connecting consecutive lows. It is a line where the price bounces off and refuses to go below. It is basically the same as a support line.

Most traders who are familiar with this pattern would try to liquidate at the top of the Head or as it started to retrace towards the Neckline

If you are still holding a stock during the Right Shoulder stage it may be your last chance to liquidate before the price tests lower ground.
I advise that you look to liquidate at the top of the Right Shoulder, remember you can always buy it back at a lower price.

What is Breakout

What to look for! Breakouts

We have now established what are trend lines and how to draw them. When one of theses lines is breached is called a Breakout.
If a breakout occurs on a Resistance line many Trader's will class this as BUY signal and act accordingly.
If a breakout occurs on a Support line many Traders will class it as a SELL signal an act
accordingly.
















Please note how the OLD Support line NOW becomes the NEW Resistance line.




















Note Rising Volumes on Breakout





















From time to time there will be FALSE signals given.

This is why it is important to WAIT FOR CONFIRMATION of a trend reversal or breakout.

It is at this point we need to add other indicators to help with our Analysis.

How to draw Resistance Line.

When we draw a line joining all the tops of a price pattern together the line is called a Resistance Line.

It is basically the exact opposite of the support, it is a series of highs on a chart where the market continually rejects the price thus not allowing it to go any higher

Many traders elect to SELL when the price reaches this point

It is our belief that the market likes to test Resistance lines more than once and we look for SELL signals after a second or third testing of this line

The same applies for resistance in that it is a powerful level and one SHOULD think seriously about taking profit at this level.

Some traders like to sell small parcels to average out their price paid and leave the rest in hope of greater gains.

What is Support Line ?

Support line












When we draw a line joining all the lows of a price pattern together the line is called a Support Line.
These lines are a low point on the chart on which the price bounces off consistently when reached

Many traders elect to BUY when the price reaches this point

It is our belief that the market likes to test Support lines more than once and we look for BUY signals after a second or third testing of this line.
If a support line is broken then the current trend is said to be broken or in a Down Trend and the market will look for a lower price to set up a new support level.

These levels ARE very powerful and SHOULD be monitored diligently when reached.

How to know trends

The basis for drawing trend lines onto charts is probably one of the most basic to do and master, yet it is one of the more powerful and reliable indicators used to determine a change in trend.

Trend lines can be applied to many different indicators but for the reference of this article we will use closing price data. This is the most common data used.
We will discuss the other uses at a latter stage.

Use the list below to navigate or simply scroll down,

1.What are trend lines and how to draw them !
2.Support lines.
3.Resistance lines
4.What to look for / Breakout's

When viewing most charts a pattern of the price formation is usually visible to the naked eye. This pattern is called a trend and these trends have three distinct patterns.


Up trend


UP TREND : Prices increasing








A down trend with trend line drawn in


DOWNTREND: Prices decreasing









Holding pattern with BOTH lines drawn in

Note Rising volumes on lead up to Breakout









HOLDING or FLAT LINE : Prices stagnant or small trading range

Draw a line connecting the lowest points on a chart in an up trend.
Draw a line connecting the highest points on a chart in a down trend.
Draw a line c Draw BOTH highs and lows for a holding pattern

Forex Education Mind Set

Here's a forex education blog post I like and thought you might too! You can find the article at:
http://financial-blogs.blogspot.com/2007/07/forex-trading-do-you-have-what-it-takes.html

or below:

Forex Trading - Do You Have What It Takes?

There are some facts that you simply must accept to have a fair chance to be successful at Forex trading. Let's have a look at what these facts are and if you can succeed in the worlds most exciting investment environment.

Trading markets are not scientific

The thought of approaching Forex trading by applying science is appealing. However, Scientific theories dont and never will work, because humans determine the market prices, and doing so, they dont consider scientific criteria.

Most people would prefer to be able to make money without risking anything. Many vendors try to gain from this fact, offering trading systems which are described as a possibility to trade with low risk and make a regular income. The fact you must accept is:

If the reward is big, the risk will be mirrored. Pure and simple, risk and reward walks hand in hand. If you can't accept taking risks, you should look for another small business idea.

So far it has been kind of negative, lets have a look at the bright side

To be successful at Forex trading will not require hard work! Work smart not hard is a perfect expression here, meaning that you don't need to learn just for the sake of learning. You'll only need to learn one system/strategy. It wont take long to learn because...

Simple straight forward systems work best. A simple system in Forex trading will outperform a complicated system, short term and long term. Why is that a indisputable fact?
Because it will always be easier to implement a simple system in a complexed market. A complexed system with a lot of parameters, makes it much harder to find the right trading opportunities. The most reliable currency trading systems all tend to be simple.

You can learn everything about currency trading

If thats a fact, why do so many Forex traders lose? The answer is the lack of mental discipline.
Currency trading is more about mindset rather than just a method. If you dont maintain discipline to follow your method, the method isn't there anymore. The best way to gain the necessary discipline is to develop your own method. You'll be confident in your trading because of full understanding of the method.

If you are able to accept and take calculated risks at the right time, Forex trading can be very profitable, due to the leverage at your disposal. Forex trading is not rocket science. Its a lot simpler than you may believe, and thanks to the Internet it's available for everyone.

The key points:
Education
Learn to accept the risks
Rely on yourself
Trading discipline

Forex Education Success Formula

You read about the risk trading the Forex market every day. I talk to many successful traders and investors about the Forex market and it is mind blowing the fear this market produces amongst the conservative investors and daredevil attitude of the aggressive traders. Yes, it is a fact that 95% of traders lose money in Forex. I was taught that if you want a better answer then you have got to ask a better question and my question is why?

The answer is rather simple – most traders seek the path of least resistance and that will inevitably lead to failure. They failed because they didn’t take the time to gain a proper understanding and cheated their Forex Education!

Look, the market is neither for you nor against you. It makes profit opportunity equally available as the chance to take a loss. It will take money from you no matter your age, sex, experience or effort you put into your trading. The Forex market only rewards those who are correct and nothing else. It’s the old saying – work smart and not hard.

That leads to the next question; how can I be correct and smart? The answer is simple – through Forex Education. I have put together my Success Formula for trading the Forex market.

1. Strategy – it’s not a one size fits all world. Different strategies play to us based on our individual trading personalities. Understanding the rules and tools are critical when applying them to the market. This comes with time and experience. Don’t short change your learning curve. It will eventually lead you to profit.

2. Money Management – planning your risk will keep you in the game as you climb the learning curve as well as exploding your account once you’ve gained the experience and knowledge. Mastering this skill is not optional!

3. Self-Mastery - is having the discipline and emotional control to manage your strategy and money management plan. Knowing yourself will be skill that catapults you in to the elite 5%. It takes self-awareness training, accepting full responsibility for all of your trading actions and the ability to go beyond trading and finding your true personality. Talk to any successful trader and you will quickly see the control they exert not only in their trading, but in their lives in general.

Learning to trade Forex isn’t rocket science. Keeping things simple and working smarter will lead you to success in this market and the path forward can only b accomplished by investing in your Forex Education.

Happy Trading!!

Forex Education - No Pain, No Gain

Forex trading breakthroughs have a lot to do with your ability to get comfortable with being uncomfortable. Success usually comes from staying in the here and now, as well as accepting the fact that the market literally can do anything at anytime.

Many of your actions now may seem frustrating - such as designing a trading plan, sticking to just a few currency pairs, learning the intricacies of a strategy. It can seem downright overwhelming too. Just remember that each step you take in the process is adding value to your eventual trading success.

Why is it that so many people are always seeking the easy way out? I guarantee the amount of time searching will be less than just digging in and climbing that learning curve as fast as possible. Just imagine where you're going to be a year from now with a little bit of effort and determination!

Here are some thoughts to get you through that learning curve at lightning speed:

1. Hard Work Now Will Pay Off Later

All the work you do now mastering the process of trading through Forex education will pay off. Will it pay off today or tomorrow? Probably not, however, the small things done consistently in the right places will pay huge dividends later.

2. Every Experience Is A Lesson

Learn from both your mistakes and your success equally. As the question - what lesson am I meant to learn from this and journal it!

3. Focus On The Positive

Losing is a part of trading. Except it and keep your self-talk 100% positive. You will find that at the end of your Forex Journey you were your own worst enemy.

4. Choose The Difficult Action Over The Easy

Doing this will make you a stronger person, not just as a trader. You will find that your characteristics follow you in trading. When you grow as a person you will enhance your ability as a trader. Ask yourself - what action would a profitable trader take and then do it!

Remember this when you get frustrated by learning a new trading technique or in transitioning from demo to live trading -- if you are uncomfortable you're growing as a trader -- and take comfort in being uncomfortable.

Happy Trading!!