Trend Continuation Patterns with Real-Time Examples
Good morning, Traders! Today we will make an educational post about the most used corrective patterns. There are numerous patterns, even more complex, such as Elliott counts where each internal wave of corrections is explored, but the reality is that it is not 100% necessary to apply it in the market.
The idea of this information is to provide a simplified, useful and applicable overview. For this, we will explain the corrective patterns and then we will show real-time examples that are being presented in the market at the moment or that have happened recently.
The examples will be in high temporalities so that the charts are valid for a few days/weeks.
One concept that encompasses all the corrective patterns that we are going to talk about is that they are all trend continuation patterns. That is to say, it is a correction that is formed and then continues to the previous trend. That said, in all cases, it is necessary that prior to the pattern, there is an impulse in that direction, that is, if we see a triangle, for it to have an upward resolution it is necessary that the previous trend be upward. While there are some cases where the patterns can go in both directions depending on the context, we won't get into them.
Keep in mind that we ALWAYS have to analyze the context of the pattern correctly. For example, if we see a bullish continuation pattern forming near a major resistance or trend line that could interrupt the price movement, it is clearly not the place to put your money. You should always look for the correct pattern + the appropriate scenario for the trade, where the risk-benefit ratio that we obtain is appropriate.
🔸Pennant Pattern: is a type of continuation pattern formed when there is a large movement in a security, known as the flagpole, followed by a consolidation period with converging trend lines—the pennant—followed by a breakout movement in the same direction as the initial large movement, which represents the second half of the flagpole.
🔸Ascending Triangle: it is created by price moves that allow a horizontal line to be drawn along the swing highs and a rising trendline to be drawn along the swing lows. The two lines form a triangle. Traders often watch for breakouts from triangle patterns.
🔸Flag Pattern: when price moves counter to the prevailing price trend observed in a longer time frame on a price chart. It is named because of the way it reminds the viewer of a flag on a flagpole. The flag pattern is used to identify the possible continuation of a previous trend from a point at which price has drifted against that same trend. Should the trend resume, the price increase could be rapid, making trade timing advantageous by noticing the flag pattern.
🔸Descending Wedge: The wedge pattern is a continuation pattern formed when the price bounces between two downward slopings, converging trendlines. It is considered a bullish chart formation but can indicate both reversal and continuation patterns – depending on where it appears in the trend.
🔸Rectangle: is when the price reaches the same horizontal support and resistance levels multiple times. The price is confined to moving between the two horizontal levels, creating a rectangle.
Real-Time examples:
AUD/USD Descending Wedge:
EUR/GBP Rectangle:
EUR/NZD Rectangle:
GBP/USD Flag:
NZD/USD Flag:
USD/JPY Flag:
The idea of this information is to provide a simplified, useful and applicable overview. For this, we will explain the corrective patterns and then we will show real-time examples that are being presented in the market at the moment or that have happened recently.
The examples will be in high temporalities so that the charts are valid for a few days/weeks.
One concept that encompasses all the corrective patterns that we are going to talk about is that they are all trend continuation patterns. That is to say, it is a correction that is formed and then continues to the previous trend. That said, in all cases, it is necessary that prior to the pattern, there is an impulse in that direction, that is, if we see a triangle, for it to have an upward resolution it is necessary that the previous trend be upward. While there are some cases where the patterns can go in both directions depending on the context, we won't get into them.
Keep in mind that we ALWAYS have to analyze the context of the pattern correctly. For example, if we see a bullish continuation pattern forming near a major resistance or trend line that could interrupt the price movement, it is clearly not the place to put your money. You should always look for the correct pattern + the appropriate scenario for the trade, where the risk-benefit ratio that we obtain is appropriate.
🔸Pennant Pattern: is a type of continuation pattern formed when there is a large movement in a security, known as the flagpole, followed by a consolidation period with converging trend lines—the pennant—followed by a breakout movement in the same direction as the initial large movement, which represents the second half of the flagpole.
🔸Ascending Triangle: it is created by price moves that allow a horizontal line to be drawn along the swing highs and a rising trendline to be drawn along the swing lows. The two lines form a triangle. Traders often watch for breakouts from triangle patterns.
🔸Flag Pattern: when price moves counter to the prevailing price trend observed in a longer time frame on a price chart. It is named because of the way it reminds the viewer of a flag on a flagpole. The flag pattern is used to identify the possible continuation of a previous trend from a point at which price has drifted against that same trend. Should the trend resume, the price increase could be rapid, making trade timing advantageous by noticing the flag pattern.
🔸Descending Wedge: The wedge pattern is a continuation pattern formed when the price bounces between two downward slopings, converging trendlines. It is considered a bullish chart formation but can indicate both reversal and continuation patterns – depending on where it appears in the trend.
🔸Rectangle: is when the price reaches the same horizontal support and resistance levels multiple times. The price is confined to moving between the two horizontal levels, creating a rectangle.
Real-Time examples:
AUD/USD Descending Wedge:
EUR/GBP Rectangle:
EUR/NZD Rectangle:
GBP/USD Flag:
NZD/USD Flag:
USD/JPY Flag: