Chart Formations and Price Patterns You Should Know

The price itself is perhaps the most powerful indicator of all, because when price patterns
form the experienced trader gains a strong alert to prepare to trade. Patterns
form, appear, and reappear because the forex market in particular is not random in
nature. When prices congeal into a pattern, it reflects market sentiment.
Recognizing patterns in fact is the basis of how learning occurs in all fields. A child
learns to talk after listening to adults speaking for about nine months to one year because
the human brain has the capacity to differentiate patterns in spoken language and that
capability makes speech possible. Similarly, when a child tries to walk but falls first, the
brain learns which pattern of steps results in successful walking. Every kind of skill can
be learned by identifying the patterns that are associated with the successful application
of that skill. Ultimately, what intelligent trading is all about is pattern recognition.
The challenge to the new trader in forex is to build a database of experiences in
trading patterns. The beginning trader lacks a history of trading. The trader with years of
trades accumulated is able to match the pattern he sees with his successful experience
with that pattern in the past. The question often arises: How long will it take to become a
successful trader? The answer is not one of time duration but one of trades. After accumulating
an experience base of 10 trades, there is almost no basis for generalizing about
future success. After accumulating an experience base of 100 trades, traders will be able
to detect patterns not only in the market but in their own trading. The critical path to
success in forex trading is a constant application of pattern-based trading and
knowledge.




By ABE COFNAS