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Price patterns are a lot like the brake lights on the cars around you when you are driving in traffic. When you see the brake lights come on in the car in front of you, you know that the car is slowing down and that you need to slow down too unless you want to crash into it. What you don’t know is whether the car is going to accelerate and continue moving in the same direction after it slows down, or if the car is going to come to a complete stop and change direction.

When you see a price pattern starting to form on a forex chart, you know the pair is starting to slow down, or consolidate, and that you need to slow down, take a step back and evaluate what may happen to it. What you don’t know, is whether the currency pair is going to breakout and continue moving in the same direction after it slows down, or if the pair is going to turn around and change direction.

Price patterns are an underutilized and extremely valuable tool in your forex-trading arsenal. It may take a little while to get comfortable with dealing with the subtle nuances and occasional ambiguity that are a part of price patterns, but once you do, you will feel like you are able to see into the future.

Price patterns are visual representations of market psychology. They tell you when traders in the market are excited and moving, when they need to take a moment and catch their breath and regroup and when they are ready to get moving again.

Attributes of Price Patterns

All price patterns are made of the following four pieces:

Old trend: the trend that the currency pair is in as it starts to form the price pattern

Consolidation zone: a constrained area defined by set support and resistance levels where the trend is undefined or channeling

Breakout point: the point which the currency pair breaks the consolidation zone

New trend: the trend the currency pair enters coming out of the consolidation zone

Price Pattern Attributes

Types of Price Patterns

Price patterns are divided into two major categories: Continuation Patterns and Reversal Patterns.

Continuation patterns tell you that the new trend is going to continue in the same direction that the old trend was moving

Reversal patterns tell you that the new trend is going to reverse directions and move in the opposite direction that the old trend was moving

The only real difference between continuation patterns and reversal patterns is which direction the new trend is moving. Both types of patterns have an old trend, a consolidation zone, a breakout point and a new trend. The next two sections discuss these patterns.

Make sure to watch the video above, and then continue to Continuation Patterns

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PKerry  - video request   |2009-11-13 04:54:31 Hi, I am PKerry, I've just entered the forex market and within a week I've lost $500 which I started with. I searched the web for tutorial and came accross your site, it's so interesting a site. I wonder why I never found it out before I started the live trading. The only problem I have now is the inability to watch the full video clip embeded in the site because of my poor network connection, so I wish to use this medium to, please, request for links to video files where I can download for offline learning. I promise to abide by your terms of usage. I need to hit back at them and gain back my money. I'll be very gratefull if my request is favorably considered. Thank you in anticipation.

John Jagerson  - Video Downloads   |2009-11-13 05:00:25 Kerry, The videos are not downloadable. However, if you press play and then pause the video for a few minutes it will buffer and should play all the way through when you are ready.

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3.25 Copyright (C) 2007 Alain Georgette / Copyright (C) 2006 Frantisek Hliva. All rights reserved."