THE BEST GRAPHIC STANDARDS TO NEGOTIATE

Igor Pereira · January 26, 2024

The Most Operated Graphic Patterns in Forex

Structure, Psychology and Market Impact

By Igor Pereira
Financial Market Analyst
Founder of ExpertFX School

Graphic patterns represent one of the most solid bases of technical analysis. Unlike derived indicators, they are formed directly by price action — reflecting institutional behavior, liquidity flow and market decision making.

They are objective, recurrent and measurable structures.

The following may be applied:

On M1 for scaling
On H1 and H4 for intraday
In the Daily and Weekly for positioning

And most importantly, they work both as patterns of continuation and reversal.

Exclusive analysis for ExpertFX School – Igor Pereira:
“Graphic patterns are not drawings. They are traces left by institutional behavior.”

What Is Behind Graphic Patterns?

Before understanding the formats, it is essential to understand what they represent:

accumulation and distribution;
liquidity absorption;
volatility compression;
Structure breakdown;
Change of control between buyers and sellers.

When correctly interpreted, they reveal market intent.

COP AND LOCK
Cup and Handle is an excellent complex breakup pattern that can be traded as a graphical pattern of trend tracking.

The screenshot below shows a classic chart pattern Cup and Handle Forex within a continuous high trend. During the upward trend, the market negotiated below the horizontal level of resistance.

The key to understanding the Cup and Handle pattern is the reaction around the level of resistance and how the price action behavior changes with each subsequent touch on the resistance:

While the price, after reaching the resistance in the first two times, was sold heavily, the last reaction shows a significantly higher strength. The price at the last touch of resistance did not fall much and the price quickly returned to resistance.
Secondly, the distance between each return to the resistance level is also shorter. This means that the price is returning to the same level earlier and optimistic market participants are raising the price faster. We call it absorption.
Although the price seems to be stuck in a side period, the price still shows strong signs of discharge.

After the breakup, the trend of discharge is resumed. Generally, traders expect a confirmed breakup, where the price closes completely above the level of resistance.

It is important to wait for this breakup, as the price can remain within the Cup and Handle standard for a long period of time.

CUNHA
The wedge pattern is considered a Forex pattern of trend and reversal end.

In the screenshot below, the wedge forms during a mature downward trend, after the price showed a tendency to fall for a long period. Looking for patterns of reversal in mature trends is the recommended approach, since mature trends have a greater chance of reversal compared to new trends that are just beginning.

When connecting the mins of the wedge pattern, the weakening of the low is apparent. The lower trend line shows a shallow angle, confirming that the price is not able to fall as quickly as before. This is an important sign of the weakening of downtown.

It is important to wait for the price to exceed the previous maximum. Ideally, you want to see a strong impulse breakup that reaches the last high with ease.

The stronger the breakup and the stronger the high pre-break sequence, the greater the chances of seeing a successful reversal of the upward trend.

The trend was strongly reversed in the direction of discharge after the breakup. Some price signals predict such a strong release of high pressure:

The longer the previous trend, the greater the chances of a powerful reversal. The longer the downward trend, the fewer new sellers remain in the market. In addition, more traders are with a significant amount of unrealised profits and are ready to leave their negotiations.
A prolonged wedge pattern in which the price is not able to go down can point to an extensive shift from a market dominated by the seller to a market dominated by the buyer.
A strong pre-break sequence can improve the quality of the pattern, as it can signal impulse change in progress.

TRIANGLE
Triangles are graphic patterns Multifunctional forex, but are best traded as trend continuation patterns.

In the example below, the market is on a high trend. The trend is currently paused and struggling with the horizontal resistance level and the trend was not continued.

The key to a good triangular chart pattern is how the minimums are forming. The arrows in the scenario below show that each minimum is larger than the previous. This confirms that buyers are buying falls earlier and earlier and sellers are not interested in getting involved.

This pattern displays a lot of pressure. Although the price is currently not advancing towards the trend, buyers still seem to be totally in control.

The final situation of the graph shows that after the first successful breakup of the triangle, the market formed a second graphic pattern soon after. The second triangle is much narrower in height, which is also a strong indicator of high, as there seem to be very few sellers and still many buyers, buying in the falls.

The next continuation happened with extreme force, which may be a consequence of the narrow strip of the triangle and the strong excess of the buyer.

FAKEOUT / ARMADILHA
A fakeout is a pattern of continuing trend with failure that usually leads to a complete reversal of the trend.

In the screenshot below, the price was initially in high trend and then moved on to a lateral continuation. The price burst, which might have seemed a continuation of the trend at the time, but within just two candles, the price was negotiated within the standard and below the resistance.

Moreover, the development of volatility is noteworthy. Near the forgery, the volatility began to increase and the candles got bigger. Although it is normal to see an increase in the high candles during a breakup, larger low candles are not something you want to see during a continuation breakup of the high trend.

Some aggressive traders may choose to negotiate in the open as soon as the breakup fails. A more conservative input approach includes waiting for complete reversal and disruption to a new minimum.

In the screenshot below, the price burst with a high impulse candle. At this point, the situation seems extremely pessimistic.

Fakeouts are graphic patterns Interesting forex and often can provide trading opportunities with a high reward:risk ratio. However, due to increased volatility in peak trends, such patterns are often considered advanced trading concepts and may not be as suitable for newer traders.

CONTINUATION OF THE BAND
Flags are among the most popular Forex graphics patterns and are exclusively trend continuation patterns.

The flag shows a weak corrective phase during an existing trend. In the screenshot below, the trend moved down with strong force initially. The corrective phase of discharge, however, does not show much strength in the direction of discharge. This difference in low strength and high weakness confirms the general feeling of the downward trend.

The greater the difference between the two stages of the market, the greater the likelihood of a successful continuation of the trend.

For this type of pullback trading, moving averages or pivot points are an ideal indicator of confluence.

During a trend phase, the price will usually be below the moving average without touching it. During a corrective phase, the price will start to be negotiated around that moving average or back to a central pivot.

Thus, we can use these tools to find corrective phases and time negotiation entries. When the price breaks below the trend line and the moving average, the continuation signal is usually given.

The downward trend continues after the breakup. Mobile Media helps us monitor the strength of the trend. During a strong and healthy low trend, the price will stay away from the moving average. If the price returns to the moving average, it can signal the next correction or even a reversal, depending on the general situation and current graphic pattern.

Head and shoulders
The Head and Shoulders pattern is generally considered a pattern of exhaustion and trend reversal. However, I also prepared an example as a continuing trend configuration to follow.

In the first scenario below, the Head and Shoulders pattern is a pattern of trend exhaustion. The market is in a mature high trend and has shown a high trend for a long period of time.

From the left shoulder to the head, the price went even higher. However, the distance between the two highest maxims is very short and already indicates weakness in the trend.

From head to right shoulder, the price shows extreme weakness. The price is not able to reach a higher maximum and is being negotiated laterally for a long period of time. These are not signs that indicate a high probability of continuing the upward trend.

After a long right shoulder and weakness in the head part, the price exploded downward. Long periods of coverage often lead to strong trend reversals.

CONTINUATION HEAD AND MEMBERS
The Head and Shoulders pattern in the example below is a trend continuation Forex graphic pattern. After the reversal of the false trend at the top, the price started a new downward trend before paused in the Head and Shoulders pattern.

At first it seemed that the price was ready to revert upwards when the price reached a higher rise from the left shoulder to the head. However, the bears later took control and all the high pressure disappeared when the right shoulder formed well below the head. The great distance between the head and the right shoulder is a strong low sign.

The trend continued downward after the price broke the support line.

When you are just beginning with the Head and Shoulders pattern, I recommend focusing first on horizontal rupture patterns. Many traders also negotiate diagonal neckline patterns. However, the trend lines are more subjective and not so easy to negotiate.

TRIPLO TOP
Although the triple top is a simple graphical pattern, I would like to include some additional tips for trading graphics patterns in this example.

As the name suggests, the pattern consists of three equally high peaks. The price put a strong level of resistance.

Ideally, you also want to look for a triple top just within a strong high trend. As mentioned above, the longer a trend persists, the greater the chances of seeing a successful reversal if all other conditions are also met.

One principle that can improve all your negotiations is to filter your potential settings and entry opportunities based on the overall location of the graph. For such an approach, you start in the highest period and mark all important levels of support and resistance. So you expect the price to return to such an important level and look for your general trading signs.

In the screenshot below, the triple top forms well in an important previous resistance area. This level has led to a strong price reaction in the past and therefore the probability of another reaction may be higher there. Especially if the context is right.

The trend changed after the price reached a new minimum. Adding a moving average can also help to understand the trend phase.

1-2-3
The Forex 1-2-3 graphic pattern is an advanced trend reversal pattern.

First, you want to identify a mature trend market. In the scenario below, the price is in a strong upward trend.

Then all of a sudden, you see a strong stage of sales. The selling wave of points 1 to 2 is the strongest low wave we've seen throughout the high trend. The wave also breaks below the last highest minimum, now forming the first lowest minimum.

Traders are then waiting for setbacks to identify entry opportunities. The next wave of trend, moving from point 2 to point 3, is forming a lower maximum and the price is not getting close to the previous maximum in point 1.

The strong low wave and the weaker high phase build the standard 1-2-3 and the traders usually go for a shorter period of time to time inputs more accurately as the lower maximums form.

Around point 3, the price will often form graphic patterns in the lower times that can be used to time trading entries. Thus, standard 1-2-3 is more advanced, since timing the regression in point 3 is not so easy and requires a multi-period approach.

FINAL WORDS
Graphic patterns offer unique insights into price development and, with the help of graphic patterns, traders can decode graphic situations effectively.

Most traders have only a very basic and superficial understanding of graphic patterns, which limits them in their negotiations. By understanding the principles and building blocks of graphic patterns, as shown in this article, traders will be able to effectively anticipate different graphic situations.

If you want to start trading graphics patterns, I recommend focusing only on a few at the beginning. It's easy to overload yourself trying to negotiate all the different graphics patterns.