Broker to Trading

For all trading, it can be helpful to know what kind of patterns may happen. This is because patterns can result in moves being delayed or not happening or happening quickly. This can be relevant to Forex and other leveraged trading, where what is happening currently on the chart is important. Patterns can be looked at in isolation as shapes to be matched to the chart. But they can also be looked at in a more granular way, by looking at the way a Forex pair is moving with respect to the actual values on the chart.

This can help make sense of the apparent ease with which patterns appear and disappear in Forex trading, the problem that whilst the past chart is filled with clear patterns, this does not seem to help with predicting the next pattern from an apparently clear beginning. That is, the flip side of clarity and frequency of pattern formation, is the lack of predictability of pattern formation. It must be noted that these patterns may not happen at all.

In the case of Yen (JPY) crosses, big figures are changes from X.99 to (X+1).00, or X.00 to (X-1).99, i.e. to the left of the decimal point. In the case of other pairs like EUR/USD, the big figure changes two places to the right of the decimal point. These figures have a tendency to result in patterns forming around them.

One way of thinking about them is to see the mid point, .50 in the case of Yen, as a kind of fulcrum. Looking at a possible example of going up, as the pair approaches the mid point, it may tend to stall and retrace.

But if there is a direction in the pair, it may sooner rather than later move through. At the point of moving through, there may be a strong candle and it may retrace after as well. But once it gets through, it may continue but encounter more stalling around .75, in the example of Yen, and then when it gets to .85, the issue of .90 and above comes into play. Thus there is directionality in Forex and other leveraged trading, but it exists within potential regularities, which can alter or even reverse it.

When looking at a chart, one may tend to see direction and momentum and project from there, but it can be helpful to see what values the pair is at to get a sense of the complexity of direction and momentum that Forex pairs can exhibit.

First it has to deal with .90. If there is a strong trend pulling the pair, perhaps from a higher but still close time frame, it may find .90 as a place for strength. If there is not, then it may find it a place of difficulty. So retracements may be in particular evidence here, still with a direction. This can be problematic, as it looks a lot like the pair is failing, but still it continues. It may retrace around .95 a number of times. But assuming some power, it may get to the big figure.

At the big figure the first time it finds it, it may peek over, that is it does actually stay over. It may then retrace back. It may try again, and get near or over and retrace back again. It may then try again. If lower highs are happening here, then this may be further indications of problems with this move at this time.

This kind of move where direction up and direction down are interplaying, looks like volatility. But there may actually be a direction there. But it may be a direction down. That is, the first failure really sent it back, but there was so much power up, that it continued to try. Then it may fall back, perhaps to .50. This may be a retraced fall, or it may be more like a series of drops. The halfway point, .50 may then provide support for a further attempt.

It may on this first attempt or on the next move get over the big figure. Then it has to deal with .05 and .10 and it may in fact retrace somewhere around these values and go back. But if the pair can get away from .10, it can continue to .20. If it gets over here it may have strength to continue to .30 and make a new move through the big figure. Of course, retracements can be expected through all these moves.

The same kind of thing may be expected as it goes down. Thus as the pair leaves .20 it starts to encounter the looming big figure in a more serious way. It may retrace with some power as it approaches. The pair may make multiple attempts just above the big figure. It may bounce either at or just below the big figure or just above it, perhaps below .05. Then the pair may retrace upwards back to say .15. From here it may return and make a more determined effort.

But also, whilst bounces are a repeated pattern, it may do this: the pair may come at the big figure and instead of bouncing, cut through it. This move can be quite directional and it may continue deeper down, into the figure below.

When it gets below, the pair may retrace at anytime, but it could get to .85 and reverse back up, even going back over the big figure and continuing upwards. It may also bounce around .75 or continue down in a stronger move, to stall around .50.