Patterns
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Last updated
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As we now know waves together form swing patterns. Swing pattern, also called wave patterns, helps in understanding the direction and potential of the direction. Being repetitive in nature, it gives a clearer vision of what to expect next based on which a trader can plan a high probability trade setup.
To learn swing patterns, zoom out the charts to see wave patterns clearly. Analyze as many wave patterns to trade them.
We have already mentioned the pattern of a trend, uptrend and downtrend and also about Motive wave Rules and Guidelines in the last lessons. Here we will talk about some of the Corrective Patterns. The corrective pattern is always preceded by a Motive (Impulse or Diagonal) wave which we learnt in our last lesson about wave patterns.
Some common swing patterns
Bull flag, a bullish continuation pattern: a descending channel having downward trending swings. at the breakup of the flag channel, a resumption of the uptrend can be expected. The bear flag is the inverse of the bull flag and is a bearish continuation pattern.
Contracting triangle – a 5-wave pattern ABCDE, with high low, lower high, higher low, lower high and up. Upon the wave E completion, a resumption of the trend is expected.
Horizontally ranging after an impulse. Expect a break out of the range in the direction of the trend. There could be false breaks also so use a lower time frame for a break preceded by a lower high in case of a downtrend.
Wedge: a rising wedge comes in the form of high, low, higher high, higher low, higher high but does not form a parallel channel but rather a contracting one, more flattened on the upside.
A Falling Wedge comes in the form of low, high, lower high, lower low, flattened on the downside if coming after a downtrend.
Wedges indicated exhaustion in the trend by loss of momentum. it is often accompanied by divergence with the oscillator. It indicates a potential reversal of a trend. Below is a rising wedge after an impulse moves up.
Double bottoms/Tops or Triple bottoms/tops: after an uptrend move, if you see two or three swing highs forming at the same level, it is a double top or triple top pattern and is a trend exhaustion signal to expect the trend to reverse or go for a bigger pull back.
Other than swing patterns, there are candlestick patterns which are mainly used for entry or trigger signals. candlestick patterns are covered under candles (hyperlink).
In our next lesson, we will learn Corrective Patterns as per Elliott wave theory which is more interesting and makes it easy to analyze corrective patterns after an impulse to take a position to trade the next impulse.
