Forex chart patterns are used widely by all sorts of traders. Price action Forex trading, which doesn't involve any technical indicators other than the price chart and its graphical formations, is rather popular nowadays. Even indicator traders sometimes refer to chart formations in their analysis. Other traders use chart patterns as the main source of entry and exit signals in their trading. Hence chart patterns form an important part of Forex-related knowledge.
The best Forex chart patterns (as rated by our website's visitors) are presented below for FX traders' reference. Accompanying the rating are brief descriptions of the patterns' possible variants. You won't find a detailed description with chart examples for each pattern here, but you will get a simple basic explanation with some useful links for further digging.
Head-and-shoulders — one of the most popular
Pinbar (or Pin-bar, Pinocchio bar) is a reliable, but barely definable, formation of three candlestick bars. The first bar is called the "left eye", the second bar is the actual "
Double top/bottom is another popular and reliable trend reversing pattern, which is similar to a
Channel is one of our favorite chart patterns, and many traders find it a reliable signal generator. Channels can be horizontal, ascending, and descending and are made of two roughly parallel lines that frame the price action for a given period. Some traders prefer to use channel breakouts, others trade inside the channel, trying to capture bottoms and tops. More details about this pattern:
Triple top/bottom is a rarer version of double top and bottom patterns. Some traders also believe that it is more reliable than the "double" version. It can also be described as
Bearish/bullish engulfing is detected when a trend is ending with a candlestick that is completely engulfed with an opposite pattern. A bearish engulfing means that the last candlestick should have an open above the previous bar's high and a close below the previous bar's low. Bullish engulfing means a candlestick that opens below the previous low and closes above the previous high. A more detailed explanation can be found here:
Ascending/Descending Triangle is a worthy trend continuation pattern, which, if broken on the correct side, offers a reliable trading opportunity in many cases. It is formed when price action creates a horizontal resistance line (a support for a descending triangle) and an ascending support line (a resistance in a descending version). Obviously, there should be some previous trend to continue. You will find more information about these triangles here:
Shooting star/bullish hammer is one of the basic reversal Japanese candlestick patterns. A shooting star is formed by a long bullish bar at the end of an upward trend followed by a candle with a long upper wick, small body, and no bottom wick. A bullish hammer is similar: a bearish trend should end with a long bearish bar that is followed by candle with a long bottom wick, short body, and a
Symmetrical triangles are formed by two symmetrical ascending and descending triangles coincidental in time. It is a continuation pattern that may advance both bullish and bearish trend. Although it can be considered reliable, the breakout point is usually very tricky in symmetrical triangles. More info on it:
Evening/morning star is a trend reversing candlestick pattern. An evening star requires an upward trend, ending with a long bullish candle, followed by a rather small bullish candle, and finally, reversed by a
Wedge can be formed by a bullish or bearish trend and is a common reversal pattern. Its main difference from triangles is that it is formed by two lines sloping in one direction. Please refer to these sources for details:
Evening/morning doji star is a candlestick pattern that is extremely similar to an evening/morning star but the middle bar is a doji — a very small candle with no body at all but with some short wicks. It is a reliable reversal signal too. Learn more about this pattern:
Gap is a concept describing a difference between the previous bar's close and the current bar's open. Usually, it is assumed that the bigger the difference is, the more reliable is the signal. The market will try to "fill" the gap by rising or falling to reach the previous bar's close level. Weekly gaps are particularly reliable signals in Forex. More on gaps:
Inside bar is probably one of the simplest, yet one of the most effective and, finally, the most misused candlestick chart patten out there. It is a trend reversing pattern and it requires a strong preceding trend to reverse it. The pattern is composed of a container bar and the actual inside bar, whose low and high should be higher and lower than the low and high of the container bar respectively (i.e., appear "inside" the previous bar). More info on trading an inside bar pattern:
Dark cloud and piercing line is another popular reversal candlestick pattern. It is formed at the end of a trend. A dark cloud is ending a bullish trend. The last rising bar is followed by a candle that opens above the previous close but is bearish and closes below the
Cup and handle, as well as an inverted cup and handle, is a trend continuation pattern with a great level of reliability but a low frequency of occurrence. It is formed by a rounded (
Hikkake — a failed inside bar pattern. This chart pattern consists of two bars — one inside bar and a subsequent HHHL or LLLH bar. Sometimes this pattern works wonders, sometimes it fails several times in a row. More about hikkake can be learned from the following resources:
Diamond chart pattern takes a form of a rough diamond — a symmetrical rhombus. It needs to be located either at the trend's bottom or top because it is a reversal formation. Even though it is often deemed a rather unreliable figure, many successful and professional currency traders (including Peter Brandt and Thomas Bulkowski) consider it a significant reversal signal. More info on this chart pattern can be obtained here:
Horn is a trend reversal chart pattern described by Thomas Bulkowski. It is formed by two protruding chart bars that resemble a letter "H". It isn't a very popular pattern, but Thomas claims that it can be quite successful. Here is more on it:
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