Beginners Guide to Finding Great Forex Trades (Part 2)

All price patterns are made of the following four pieces:

1) Old Trend: The trend that the currency pair is in as it starts to form the price pattern

2) Consolidation Zone: A constrained area defined by set support and resistance levels where the trend is undefined or channeling

3) Breakout Point: The point at which the currency pair breaks the consolidation zone

4) New Trend: The trend that the currency pair enters coming out of the consolidation zone

Types of Price Patterns

Price patterns are divided into two major categories: Continuation patterns and reversal patterns.

Continuation patterns tell you that the new trend is going to continue in the same direction that the old trend was moving.

Reversal patterns tell you that the new trend is going to reverse directions and move in the opposite direction that the old trend was moving.

The only real difference between continuation patterns and reversal patterns is which direction the new trend is moving. Both types of patterns have an old trend, a consolidation zone, a breakout point, and a new trend. The next two sections will discuss these patterns.

Make sure to watch the video below, and then stay tuned for Part 3 tomorrow.

By S. Wade Hansen of LearningMarkets.com