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How to Read Different Types of Chart Pattern Setups for Beginners

Continuation Patterns

Continuation Patterns

Pennant chart pattern is a continuation setup that looks like a symmetrical triangle in shape & is drawn using support & resistance lines.

Pennant pattern occur during a trend - either upwards trend or downwards trend. These pennant chart patterns signal consolidation phases of the price.

Bullish pennant chart pattern - occurs during an upward trend direction and this bullish pennant chart setup displays that price has the potential to move upwards and continue in the overall upwards trend direction.

Bearish pennant trading pattern - occurs during a downward trend direction and this bearish pennant chart setup displays that price has the potential to move downwards and continue in the overall downward trend direction.

Continuation Patterns

Gold wedge chart patterns are continuation patterns.

Bullish wedge chart pattern - Rising Wedge, Ascending Wedge, Ascending Triangle is a bullish continuation chart pattern that signals prices are likely to continue moving upwards once prices move above this rising wedge chart pattern - ascending wedge setup.

Bearish wedge chart pattern - Falling Wedge, Descending Wedge, Descending Triangle is a bearish continuation chart pattern that signals prices are likely to continue moving downwards once prices move below this falling wedge chart pattern - descending wedge setup.

Continuation Patterns

Rectangle chart pattern is a price trend continuation pattern formation and this pattern has horizontal support & resistance zones.

Bullish rectangle pattern - When a rectangle pattern forms during a upward trend it signals an upward trend move is likely to follow next once price breakout of this triangle setup.

Bearish rectangle pattern - When a rectangle pattern forms during a downward trend it signals a downward trend move is likely to follow next once price breakout of this triangle setup.

Reversal Setups

Double Top Pattern

Double tops setup is a reversal chart setup that forms after a uptrend & this pattern forms 2 tops at approximately the same level.

Bearish Reversal Signal - Double tops setup is a bearish reversal signal setup.

Double Bottom Setup

Double bottom setup is a reversal chart setup that forms after a downtrend & this chart pattern forms 2 bottoms at approximately the same level.

Bullish Reversal Signal - Double bottoms setup is a bullish reversal signal.

Head Shoulder Chart Setup

Head and Shoulders setup is a reversal trading pattern formation that forms at the top of an upwards trend. Head and Shoulders setup is a bearish reversal chart setup that forms after a upward trend.

There is an initial peak which's the first shoulder then a small dip in price, then the second higher peak which is the head then another price dip which is followed by last peak in price which is the second shoulder.

The lowest points between the 2 price lows forms the neck-line and the reversal signal from this head and shoulders chart pattern is confirmed once price goes below this neckline.

Reverse Head Shoulder Chart Setup

Reverse Head and Shoulders setup is a reversal trading pattern that forms at the bottom of a downwards trend. Inverse Head and Shoulders pattern formation is a bullish reversal chart setup that forms after a downwards trend.

There's an initial dip that's the first reverse shoulder then a moderate peak in price, then a second lower trough which is the reverse head and then another price peak followed by the last price dip in price which is the second inverse shoulder.

The highest points between the 2 price peaks forms the neck-line & the reversal signal from this reverse head and shoulders chart pattern is confirmed once price goes above this neckline.

Consolidation Patterns Setups

Consolidation patterns are also known as symmetric/symmetrical triangles - the consolidation setup resembles a symmetrical triangle.

Symmetrical triangle chart pattern signal a consolidation in the price & a price breakout is likely to happen on either side once the price breaks out of this consolidation triangle setup.

Gold traders will wait for the price to break out in one direction before opening a trade in the direction of price breakout.

Summary:

Continuation Patterns/Setups: Pennants - bullish pennant & bearish pennant, Wedges - Ascending wedge and descending wedges & Rectangles

Reversal Patterns/Setups: Double Tops, Double Bottom, Head and Shoulders, Inverse Head & Shoulders

Consolidation Trade Patterns: Symmetrical Triangles

How to Read Different Types of Chart Pattern Setups for Beginners

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