Trend Reversal Patterns📈📉
1️⃣ Pattern head and shoulders
After the pattern has become visible, namely, the right shoulder is visible, the trader needs to wait for the breakout of the neckline. Breakouts occur on strong impulses with a sharp increase in volume. Therefore, in order not to miss the entry and enter at the best price, it is better to use a sell stop order.
To calculate where the price will go after the breakout of the pattern, it is enough to measure the height of the pattern (vertically from the maximum of the head to the neckline) and postpone it until the breakout point.
2️⃣ Inverted head and shoulders pattern
Occurs in a downtrend and foreshadows an uptrend. The rules for working on a figure are similar to the previous ones.
It should be noted that "head and shoulders" in its pure form is very rare. Be careful!
3️⃣ Double Bottom Pattern
After you have identified the pattern on the price chart, you need to wait for the breakout of its resistance line. If the price has broken through the resistance, then the target will be the width of the pattern's range - the distance from the lowest point to the resistance.
4️⃣ Double Top pattern
A double top is like a double bottom. The only difference is that this pattern is reversed and occurs in uptrends.
The number of extrema in a pattern can be not only double, but also triple. But the rules of work will be the same for everyone - enter the breakout, postpone the target to the height of the figure and wait for it to be fulfilled.
5️⃣ Diamond
We measure the height and wait for the breakdown. If there is a breakout, then the target of the price movement will be the height of the pattern from the breakout point.
6️⃣ Cup and handle
Trades are opened when the "handle" is broken upwards. The target is the height of the formation.
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