Identifying chart pattern is one of the very important part of technical analysis. I was studying about chart patterns recently. During reading, it seems to be very easy to understand as the training materials shows the charts with marking the chart patterns. But when I try to find out a chart pattern in a live chart..... I feel like, I'm lost. I find nothing. I think, it needs more reading and regular practice of trying to find chart pattern.
I think, zooming out a live chart to get an overview of a larger picture in a different time frame might help finding a chart pattern. Yesterday, I was looking for chart pattern.....
Currency pair: EUR/USD
Time frame: 15M
Yesterday, I plotted the lines and thought it to be a pennant formation. Which means, price will continue previous trend. That is, if it forms after a downtrend, it will go downwards. It's a consolidation phase. So I went to bed assuming, price will go downwards and planned to show my analysis in the blog.
But today I found that price went upwards to previous swing high level. So I started to think, what wrong I've done here...why my calculation went wrong. I went through my tutorial again and then I found that I was wrong in my analysis in the very beginning. Pennant form after a very strong trend, almost a vertical trend. But here the market was almost moving sideways if we can just ignore that one small swing.
See, when it formed the ADX (14) was below 20. So strength of the trend was very poor. In fact it was a triangle, a symmetrical triangle (again, I'm not sure. I'm giving my opinion according to my own understanding by learning from online free tutorial). A symmetrical triangle can lead price to any direction. So when a symmetrical triangle forms, many traders gives two pending order, one above the triangle, a long position and another below the triangle, a short position. When one order hits, other closes. In this case price moved upwards.
A gain of about 40 pips. Not bad..... Holiday period now....markets should be ranging with some exceptions....
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