Now this is the chart for BTCUSD showing a long opportunity. This isn't a trade I took but for those who want an idea of how to trade chart patterns like these just follow this scenario.
To trade chart patterns, you must first determine what the chart is doing. In other words you need to ask yourself-'is the chart consolidating/ranging, or is it trending? If it is trending which direction is it trending in and where should I place my entry and exit points? After you have answered all these questions you can proceed to take your trade but with proper risk management.
So from the btcusd chart shown, we have identified that the market first trended upwards, then it took a pause and begun consolidating to form what we call an ASCENDING TRIANGLE. This is a chart pattern of higher lows and a resistance level/area that buyers are trying to penetrate. But the issue is that we can't just go long because we are unsure of the direction in which the break out will occur. So in order to make an ENTRY (#entrytechniques) we must first wait for a break out in either direction. In this case the breakout was on the upside so depending on the kind of trader you are, you can either enter after the close of the breakout candle or wait for a second close above resistance (recommended as it prevents you from being the victim of a fake out)
Take profit and set a stop loss (#EXITtechniques).
To take profit you must set your tp order at the exact height of the of the triangle as shown by the yellow lines and you may also set your stop loss a few pips below the breakout candle but the risk with this is is that the stop loss may be too tight and prices may temporarily reverse to take you out first before continuing in your desired direction. Or you may place your stop loss at a desired 1:1 RISK REWARD RATIO to reduce your chances of being the victim of a fakey.
To trade chart patterns, you must first determine what the chart is doing. In other words you need to ask yourself-'is the chart consolidating/ranging, or is it trending? If it is trending which direction is it trending in and where should I place my entry and exit points? After you have answered all these questions you can proceed to take your trade but with proper risk management.
So from the btcusd chart shown, we have identified that the market first trended upwards, then it took a pause and begun consolidating to form what we call an ASCENDING TRIANGLE. This is a chart pattern of higher lows and a resistance level/area that buyers are trying to penetrate. But the issue is that we can't just go long because we are unsure of the direction in which the break out will occur. So in order to make an ENTRY (#entrytechniques) we must first wait for a break out in either direction. In this case the breakout was on the upside so depending on the kind of trader you are, you can either enter after the close of the breakout candle or wait for a second close above resistance (recommended as it prevents you from being the victim of a fake out)
Take profit and set a stop loss (#EXITtechniques).
To take profit you must set your tp order at the exact height of the of the triangle as shown by the yellow lines and you may also set your stop loss a few pips below the breakout candle but the risk with this is is that the stop loss may be too tight and prices may temporarily reverse to take you out first before continuing in your desired direction. Or you may place your stop loss at a desired 1:1 RISK REWARD RATIO to reduce your chances of being the victim of a fakey.