Forex Trading - What Is the Most Reliable Chart Pattern?

By: Nathan Pennington ,

Who is the most beautiful woman in the world? Difficult to pin an exact answer to. It depends on who is looking. The same holds true of forex chart patterns.

It really depends on the person trading it.

That said, there are some chart patterns that are better than others are. One has been around since the beginning of time of traded markets. It has gone by many names. Without a doubt new names will be invented for it in the future.

That chart pattern is the lowly pullback. It’s also called a flag, or pennant. Fibonacci trading totally revolves around trading the pullback. You can trade also with moving averages, or moving average envelopes. You can also you Bollinger bands to help identify pullbacks.

Of course, this pattern is not foolproof. After all a full-fledged reversal looks like a pullback in the early stages. That can be somewhat corrected by waiting for the market to begin to move in the original direction before entering the trade.

Yes, I believe that the simple pullback (retracement, whatever you want to call it) is the best chart pattern. It relates well to the psychology of the market. Everyone is buying (or selling) in a mass crowd. No thought is given to the fact that buyers are limited. The market will reverse simply because you will run out of traders will to trade that direction. You’ll use them up eventually.

The market turns around. Now the smart traders begin to plot their entry. Others who missed the move begin to jump in at this “cheaper” price. Again the price resumes its original move.

It happens again and again and again. And it will continue to do so until markets are no longer traded.

Do you want to learn more about how I trade? I have just completed my brand new guide, “Forex Trading - What Finally Worked For Me”.

Download it free here: Forex Trading

Nathan Pennington is a forex trader and the author of Winning Forex Trading -THE Definitive Guide

Article Author: Nathan_Pennington  

Article Source: http://www.many-articles.com

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Forex Trading - What Is the Most Reliable Chart Pattern?
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