Ahhhh my head is splitting!!

[ForexNewbie1]

:56

I am on middle school and its teaching me about wedges and rectanges but i dont understand any of it! i am looking at my chart whilst i am studying yet im not spotting anything, it all just seems to hard to spot.

For instance on the rectange page it says about seeing a massive up trend and then it consolidates for a while and then it will go up even more however when i looked on my chart i have noticed in parts its done the oppposite.

I was doign so well i thought up until this point where its getting so confusing. Any words of advice?

[SithJawa]

@ForexNewbies: To understand patterns better you need to understand the theory and psychology behind them you should definitely skip the patterns and come back to them when you have a better grasp of the market as they are nearly impossible to spot until you have a good grasp of basic market movement and psychology, but when you do its easy

[ForexNewbie1]

Ok, so just come back to these and come back to them when i graduate?

[SithJawa]

It's hard to say for certain but i think that would be best, That's what i had to do, it wasn't until i started understanding the why and the how of different methods and strategies that i started being proficient in them this is what i suggest to everyone: After you go through the babypips school a couple times (seriously memorize the concepts in there, it is invaluable), go to the trading system forums and look at peoples strategies, figure out how they work, why they work, how you could make them better, their pros, their cons etc. You will learn SO MUCH, and it wont take long

[ForexNewbie1]

Hi, thanks

I spotted this and made a rectangle, did i get it right? if i had sold when the rectangle burst i would be in profit

[SithJawa]

The problem with rectangles and every other pattern is they are rare, happen over a long period of time, and are subject to far too much human interpretation and experience necessary to spot reasonable patterns, I don't personally trade them

But remember with rectangles, price has to have a top price and a low price that is tested multiple times without being broken, in your example the first Half has quite a few candles that can't break through the high and low price, but then price does break through and make a new high, so it isn't valid :3

Also rectangles are only traded as continuations, meaning If that was valid you would've bought rather then sold,

Patterns are all trading visual representations of market psychology, say the trend is bullish, in a rectangle price loses momentum in a trend and begins moving sideways while the bulls regain strength, and after they have enough buying power price shoots up more

[MeiHua]

Also these patterns are unique every time and never exactly like the example. What you will realize is there are key elements for something to be considered a formation or a structure that you will be intrested in trading. It takes a lot of practice and seeing them 100s of times.

[ForexNewbie1]

Just found this site and it explained it a bit better, maybe because the chart is shown bigger on this site.

Rising Wedge (Reversal) - ChartSchool - StockCharts.com

Based on what i learned on that site as well i spotted a rising wedge and as far as i know draw it correctly. ie at least 2 high points each higher than the other and at least 2 lower points each higher than the other.



Feedback on if i have this correct would mean the world to me

[SithJawa]

The website explains it very clearly however that is not a valid rising wedge

The prerequisites are it needs to have at least two higher highs and two higher lows in an uptrend, meaning it has at least two upswings, as price continues upwards in the trend the higher highs start becoming lower, and the higher lows start becoming higher, meaning the highs and lows start to get narrower and closer together, to visualize this you put the trendlines above the highs and below the lows, and if these two trendlines start to converge you know it is a valid pattern

I think you understand it well but you are trying to hard to fit the trendlines to the pattern, the top trendline is perfect but the bottom trendline you only connected to one low, the second point where you connected your trendline too isnt a low and therefore not the place to connect your trendline, you shouldve placed it at the low you have it connected too and the low immediately before it

[Fxmall]

Rectangles are not that easy to spot and if you are trading in shorter timeframes, not possible at all. And yes, reading the patterns correctly would take a while and as others have suggested, you can head back to that chapter later on. A better idea wold be to maintain a trading journal, with the charts for that time period. Later on, you can analyze it and see if you can spot the pattern..