Technical Analysis

Matching Low Candlestick Pattern – Definition and Guide

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The candlestick pattern Matching Low is a formation of two bearish candles presented in markets with a downward trend. It has moderate reliability and indicates that the price is likely to change from a bearish to a bullish trend. This pattern can be identified as follows: The current market trend is bearish. During the first period, a big black candle is formed. In the … Read more

Fractal Adaptive Moving Average (FRAMA)

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The Fractal Adaptive Moving Average (FRAMA) is an adaptive and intelligent moving average developed by John Ehlers. It takes into account and gives higher priority precisely to price changes and closely follows the price when it shows significant movements, while in range markets it remains flat without presenting major changes. It uses the fractal dimension of market prices to dynamically adjust its smoothing period. 

FRAMA takes advantage of the fact that markets are fractals and dynamically adjusts the look-back period based on this fractal geometry. The actual calculation of this moving average is very elaborate and complicated. FRAMA is often used in combination with other signals and analysis techniques.

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Bullish Harami Cross Candlestick Pattern

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Harami Bullish Cross pattern

Definition and identification

The candlestick formation Bullish Harami Cross is a trend reversal pattern that occurs in bearish markets, and indicates that there is a probability that a change from bearish to bullish trend will occurs. This pattern has a moderate reliability and can be identified as follows:

  • First a long candle is produced, which can be white or black.
  • A Doji is then formed in the next period, which is within the range of the previous candlestick.
  • The previous trend must be necessarily bearish.

Harami Bullish Cross pattern

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Trend Continuation Patterns in Technical Analysis

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Rectangle price pattern

In this article we are going to focus on the topic of trend continuation price patterns. We will cover many topics related to technical analysis such as basic concepts, description of trend continuation formations, and tips on how to trade once the trend continuation pattern is found. In this way, we hope to answer the main questions on the subject, especially those related to the identification of these price formations and their use as technical tools to trade in Forex and other markets.

The three pillars of Technical Analysis

Technical analysis is based on three basic principles, which are known as the three pillars of technical analysis, and they are the following: 

  • Price reflects everything.
  • Prices move in trends
  • The history repeats itself.

It is essential to understand each of them to really understand what technical analysis is and how it works. Let’s review each principle:

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Expanding Triangle – How to trade with this price pattern?

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Expanding triangle price pattern

What is the expanding triangle pattern? The expanding triangle pattern, also known simply as expansionary formation, is formed during periods of very high market volatility, with many price oscillation and a not very clear trend. With each swing the pattern expands further, forming two opposite trend lines. An expanding triangle consists of a series of swings that widen as price … Read more

The Rectangle Pattern – Trend continuation chart pattern

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Rectangle pattern

The rectangle is a trend continuation pattern and consists of a price formation in which demand and supply are apparently balanced for a certain period of time. The price moves in a narrow range where it finds a support at the bottom of the rectangle and a resistance at the top of the figure.

Finally, the price ends up breaking out the rectangle range, either through support or resistance. If the previous trend was bullish, then the breakout is most likely to be bullish, but if the previous trend was bearish, the move will most likely be bearish.

However, the rectangle can also be a reversal trend pattern, for example if the previous trend was bullish and the pattern breakout occurs on the downside or when the previous trend was bearish and the price breaks through resistance.

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Evening Star Candlestick Pattern

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The Evening Star candlestick pattern is a highly reliable trend change formation that occurs in bull markets and indicates that there is a high probability that the price will change from a bullish to a bearish trend. This pattern can be identified in the following way:

  • The previous trend must necessarily be bearish.
  • A large white candlestick is followed by a candlestick (white or black) with a small body that opens and closes above the body of the large white candle. 
  • In the following period, a black candlestick is formed and its opening price is formed below the minimum price of the body of the previous candlestick while the closing price occurs inside the body of the great white candle that started the formation.

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Frequency of Occurrence of Pullbacks in the Markets

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According to recent studies on a universe of tens of thousands of graphic patterns (27,000), the chance of a pullback occurring after a support breakout is approximately one in two.

Going into more precise details, these studies indicate that the probability of occurrence of a pullback is 57%. That is, in 57 out of every 100 support breakouts, the price will return to the broken support in the following 30 days (obviously, in 43% of cases, this return will not occur).

In addition, we can estimate that the price will drop during the 5 days after the breakout. Of course, all these data are averages, as you can guess. It does not mean that, after all the support breakouts, the market will drop just for 5 days.

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Andrews’ Pitchfork – Definition and Rules of Using

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The creator of Andrews Pitchfork was an American named Alan H. Andrews, who based much of his thinking on cycles, especially Newton’s III Law applied to economics. This principle indicates that for each force acting on a body it exerts an equal but opposite force on the body that caused it. This well-known principle of physics was applied by Andrews in his trading and in fact, he gave a seminar called “Action-Reaction Course“, which allowed him to earn a lot of money. 

In this course, Andrew presented a methodology that made it possible to decompose the market trend by dividing it into two equidistant channels which in the graph looked similar to a trident, hence the name of this technique.

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