Knowing the best chart pattern for day trading is something you need to know, especially if you want to be successful in forex trading. One of the most common trading methods used by traders to seek profit in the forex market is Day Trading.
This trading method only focuses on trading in a short period of time, which is less than one day. This is what prompted many people to start learning this technique.
In this strategy, the trader has complete flexibility or freedom in designing an entry technique. Traders can use technical indicators and use price action techniques to observe chart pattern for day trading as a reference for opening positions.
Know Chart Patterns in Forex Trading
Chart pattern is used by traders in the best forex broker as a reference to predict where the price will move next. In addition, the Chart Pattern is a reflection of what is happening in the market. Chart Patterns can be classified into two types, namely:
1. Continuation Patterns: As the name implies, these patterns indicate the continuation of the price trend. In general, this type of pattern will show a temporary break from the existing trend, then after a while the price will continue the initial trend to higher or lower levels.
2. Reversal Patterns: Trend reversal patterns or changes in market direction, marked by testing at important levels such as Support and Resistance as well as psychological levels.
This pattern will be valid if the price fails to break the important level and reverses the direction of the previous trend.
Best Chart Pattern for Day trading: Flag Pattern
The first order of the best chart patterns for Day Trading is the Flag Pattern (flag pattern). This pattern is a pattern that is formed when the trend is strong and indicates that the trend will continue.
Flag patterns usually appear with a shape similar to the Rectangle pattern. The formation of this pattern was initiated by a strong price movement and then stopped by the price correction which formed a channel with two parallel trendlines.
A strong price movement is called a Flag Pole, while a price correction is called a Channel Flag. The two Trendline lines that mark the correction will be the Support and Resistance areas.
The price will continue to be in the Trendline until a breakout occurs on one side. Usually, the channel formed in the Flag pattern must be opposite to the trend direction. From its own direction, the Flag pattern is divided into Bullish Flag and Bearish Flag.
Day Trading Rules Using Flag Patterns
Trading with this chart pattern for day trading certainly needs to follow certain rules so that traders can get a higher level of profitability. The rules are entry, stop loss and take profit.
Position Entry: Traders need to wait until the Channel Flag breakout occurs. Then, entry can be made by placing a Pending Order or waiting for a pullback that occurs after the breakout.
Stop Loss: The low/high level of the Channel that is formed is the place to place a Stop Loss. During an Uptrend, SL is placed at the low of the Channel; while during a downtrend, SL is placed on the high channel.
Take Profit: The TP value can be placed equal to the length of the Pole or adjusted to the respective risk tolerance. Then to increase the accuracy of trading using this pattern, you can do some of the tips below:
1. Observe the volume on the Pole and Channel Flags.
2. Wait until the Channel Flag is formed completely.
3. Use Fibo as extra help.
One thing to remember, no matter how good you are in trading, if you choose the wrong broker, then you can also lose big. Therefore, choose a trusted and licensed broker such as Didimax Forex Broker.
Always learn new things and tips about forex so you can trade with minimal risk. You can also use the chart pattern for day trading to gain profits in forex trading.
