3 CHART PATTERNS
CHEAT SHEET
You already know my three favorite chart patterns and why I use them. Visit
http://dailypriceaction.com/free-forex-trading-lessons/3-forex-chart-patterns-you-
need-to-know to see them all.
But sifting through a 2,000-word lesson for actionable information can be a
challenge. Also, knowing which patterns I trade is great, but knowing how I trade
them is far more beneficial.
Well, you’re in luck because I’ve put together this cheat
sheet that will show you exactly how I trade all three price
formations including how I determine profit targets and
stop loss levels.
1 HEAD AND SHOULDERS PATTERN (AND INVERSE)
Key Characteristics
The head must be higher than both shoulders (or lower for the inverse head
and shoulders)
Shoulders must be on the same horizontal plane
Head and shoulders Inverse head and shoulders
Entry Rules
Wait for a close below the neckline (4-hour or daily)
Look to enter short on a retest of the neckline as new resistance
Head and shoulders entry Inverse head and shoulders entry
Stop Loss Placement
Stop loss goes above the candle that broke the neckline (below the candle
for an inverse head and shoulders)
Or...
Above the last minor swing high (below the last minor swing low for the
inverse head and shoulders)
Head and shoulders stop loss Inverse head and shoulders
stop loss
Setting Profit Targets
Visit http://dailypriceaction.com/free-forex-trading-lessons/determine-profit-
targets-like-pro-using-measured-objectives to find out how to set your profit
targets.
2 WEDGE PATTERN
Key Characteristics
Must have at least three touches
on both support and resistance
Should form on the 4-hour time
frame or higher for best results
Entry Rules
Wait for a close above or below resistance or support respectively
If it breaks to the upside, buy on a retest of former resistance
If it breaks to the downside, sell on a retest of former support
Bullish Entry Bearish Entry
Stop Loss Placement
Stop loss goes above or below the candle that broke the wedge
Or...
Above or below the last minor swing high or swing low respectively
Bullish Stop Loss Bearish Stop Loss
Setting Profit Targets
Visit http://dailypriceaction.com/free-forex-trading-lessons/determine-profit-
targets-like-pro-using-measured-objectives to find out how to set your profit
targets.
3 BULL AND BEAR FLAG
Key Characteristics
Support and resistance must be parallel
The size of the flag should not be larger than the flag pole
Bull Flag Pattern Bear Flag Pattern
Entry Rules
Wait for a close above or below resistance or support respectively
If it breaks to the upside, buy on a retest of former resistance
If it breaks to the downside, sell on a retest of former support
Bull Flag Entry Bear Flag Entry
Stop Loss Placement
Stop loss goes above or below the candle that broke support or resistance
respectively
Bull Flag Stop Loss Bear Flag Stop Loss
Setting Profit Targets
Visit http://dailypriceaction.com/free-forex-trading-lessons/determine-profit-targets-
like-pro-using-measured-objectives to find out how to set your profit targets.
