| Do chart patterns work in trading Forex? Bar and | | | | Chart patterns and randomness |
| Candle formations? Triangles, etc? | | | | It has been proven many times by statisticians, |
| Here is a better question. If a chart pattern appears | | | | economists, and mathematicians that chart patterns |
| on your chart or an automated system finds a chart | | | | can be created by flipping and recording the results |
| pattern, what are the chances it will reverse? | | | | of coins and/or drawing random numbers. That |
| One of the major problems with chart patterns is | | | | means that these patterns on price charts do not |
| that traders locate them and discuss them as if they | | | | mean what many traders think they means. This is |
| materially existed. Many devise important sounding | | | | why traders using chart patterns employ other |
| terminology to describe what the particular pattern is | | | | means to confirm, or attempt to confirm the trade. |
| saying about the current market conditions. Or that | | | | Trades move for one reason |
| the pattern describes a certain market behavior at | | | | Trades at these chart patterns reverse for one |
| that particular moment. Most of this is nonsense. | | | | reason. Momentum in the market changes. Regardless |
| With all the traders in the world trading a currency | | | | of the spin, no chart pattern is going to yield results |
| pair such as the EURUSD anyone who can find their | | | | all the time. It would be better for the trader using |
| head to put on a hat should realize that bars on a | | | | chart patterns to study the odds of their signal |
| chart can represent very little about market | | | | reversing at key times during the day when perhaps |
| psychology. | | | | a momentum oscillator such as RSI signals at the |
| The Hammer or Pin Bar | | | | same time. |
| One particular pattern that price action traders like to | | | | When you have the odds in your favor as a result of |
| point to, is the pin bar or hammer. This is a reversal | | | | actual statistical data then regardless of the reason a |
| signal. When it works it is found at the bottom of a | | | | chart pattern might be there, you have a valid trade. |
| downtrending price trend. The next bar is up and the | | | | RSI is a great momentum oscillator and I have |
| trend reverses. You can scroll through your chart and | | | | written about it extensively and done statistical |
| find these and many do occur at the bottom of a | | | | studies that increase the odds of being correct in |
| downtrend. However, just as many of these can be | | | | your trades. |
| found within a trend where the signal failed. | | | | |