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Learn price models in technical analysis

13-01-2018 | No Views : 171

Learn price models in technical analysis

Price models in technical analysis are important tools that help traders and technical analysts anticipate the next move of the price, and they give chances of great success when the models are extracted and used correctly.
One of the theories based on the technical analysis is that history repeats itself, and it was noted that in most cases when the emergence of one of the price models that will be addressed in this lesson, either the price continues in the direction or reflect the type of apparent model, as the price models are divided into Two types are reflective models that cause a reversal of direction, and continuation patterns cause the price movement to continue in the same direction.
Price models are also called classic models, price patterns and other labels, but here we used the term continuity models as they are the months between traders and technical analysts.
The classical models are based on the link of the peaks with the connecting of the bottoms in the direction lines to extract the model from the graph. The duration of the formation of the model is an important element in the validity of the pattern as we will explain below in the conditions of the composition of each model and the probability of success.

Reflective models of price models in technical analysis

In this part of the lesson we will address the reflective models of price models in the technical analysis, with the conditions for the formation of each model and how to trade it.

Price model in technical analysis Head and Shoulders model

The head and shoulders model is one of the most famous technical models in the technical analysis and the most important, it is a strong signal on the near reversal of the price direction, and it comes in both directions when it consists at the end of the upward trend is a sign of the possibility of falling prices, either if at the end of the bearish market is a signal For the rise of prices.

Configure the head and shoulders and conditions of the completed form

The monthly pattern of the price patterns in the technical analysis consists of three peaks where the second top is higher than the left top and the right top when it comes at the end of an upward trend to be similar to the head and shoulders of the human being and is therefore called the stock, and its emergence at the end of the bearish trend is in the form of three bottom bottoms The middle is lower than the left and right bottom and is called in this case with the head and shoulders inverted.
The pattern is complemented by a breach of the neckline which supports the bottom of the model tops when it is at the end of the bullish trend and represents resistance to the highest bottoms when it comes to the end of the bearish trend, as shown in the attached pictures of the model.

The head and shoulders model is complete

  • The form only supports if it is configured at the end of a clear direction, and does not support attic in the cross-orientation.
  • Form formation time is important as it is preferred to have a form formation time of more than six weeks.
  • The price of the neckline (Nick Line), although the neckline of the cross is stronger as it represents support or resistance to the price, but when the slant does not spoil the model.
  • The head should be higher than the shoulders at the end of the uptrend and the head should be lower than the shoulders at the end of the bearish market.
  • The shoulders must be equal, and allowed to be in difference but not too large.

Volume of the head and shoulders model at the end of the uptrend

When the volume at the head is less than the volume of the left shoulder adds strength to the model, as it indicates a lower pressure on the price of the buyers, and the weakness of the volume of the left shoulder is an important signal of the strength of the model, and then we see an increase in volume with the price break For the neckline, go back down again with the neckline re-test.

Volume of the head and shoulders model at the end of the falling market

When the volume of the head is below the volume of the left shoulder, it indicates weakness of the supply forces, and a break of the neckline when it comes with high folium increases the chances of success of the model.

Entry points with target setting and exit exit of the head and shoulders model

The head and shoulders model, like the rest of the price models in the technical analysis, has clear entry and exit points, and the best entry points with the pattern are after the neckline has been breached and retested, as the retest is a sign that the pattern is confirmed.

determining the goal

  • With the normal head and shoulders model the target is equal to the distance between the neckline and the top of the head as shown in the attached picture.
  • With the inverted head and shoulders model the objective is to measure the distance between the neckline and the second bottom {S model.
Dear reader, preferably 70% of the distance between the neckline and the head of the model, as it is often reflected in the price before reaching 100% of the target.

Stop loss

  • Stop loss of the head and shoulders is normal top of the top third right shoulder of the model.
  • Stop the loss of head and shoulders inverted bottom bottom third right shoulder of the model.

An example of a head and shoulders model

This is an example of the practical application of the head and shoulders pattern, noting the complete upside-down pattern of the head and shoulders pattern on the EUR / USD chart for the daily time frame, as shown on the attached chart.
Note that the price start at the formation of the first bottom which represents the left shoulder and then the second bottom of the top of the model which came at a lower level of the first bottom, followed by the third bottom at a price level higher than the head and at a level close to the left shoulder.
Head and shoulders
The pattern was completed by breaching the price of the neckline, which came in a slanted form. After the price rose slightly, it re-landed near the neckline to act as a retest, and then the price started to rise.
The stop loss below the right shoulder slightly at 0.83574, since the distance between the top of the model and the neckline is almost 600 points, the target of the pattern was the same to be at 0.93411, and as shown on the graph, the price stopped slightly when reaching the target before the completion of the climb.
Thus, we have completed the most important form of technical models in the technical analysis, which traders can rely on to achieve a good expectation of the movement of the price of the future, which can be traded with a high probability of success.

Price model in the technical analysis of the head and shoulders complex model

This model is not different from the head and shoulders model mentioned above in the terms, but sometimes it comes in slightly different forms than the traditional model.

Formed head and shoulders complex

  • The model can come with two heads in the middle of the shoulders.
  • The model can also come with shoulders on the left and shoulders on the right.
This is why the model in this case is called the head and shoulders complex, but it does the same function is a reflective model, and does not change that it is one of the best technical models in technical analysis.

An example of a complex head and shoulders pattern

Head and shoulders are complex
The clear pattern on the chart in the attached picture shows that it is similar to the traditional model, but the obvious pattern in front of us consists of a head and shoulders on the right and two shoulders on the left.

Price model in the technical analysis of the Triple Tops model

The triple tops model is one of the most popular price models in technical analysis, not unlike the head and shoulders model, as it consists of three peaks but equal.

Formation of a Triple Tops model

  • The pattern comes at the end of the uptrend, and there must be a clear direction where it does not depend on when it is formed in an accidental direction.
  • The model consists of three peaks at a price level that is close or equal.
  • The duration of the form must be more than six weeks.
  • The model is completed by breaking the neckline.
 Triple Tops
The model is similar to the head and shoulders model as mentioned above, and is also similar in target setting, since the target of the price model is the three bottoms equal to the distance between the neckline and the top, and the best point of entry is with re-testing the price of the model and not with the fracture, Return the price to trade higher neckline again.

Triple Bottoms model

Triple bottoms model
The triple bottoms pattern is similar to the three-point pattern mentioned above in everything from a target to an entry point. However, the only difference is that the triple bottoms pattern is at the end of the bearish trend, unlike the triangle pattern at the end of the bullish trend.
Dear reader, we have completed the first part of the lesson of teaching technical models in technical analysis, which we dealt with three of the most important technical models in technical analysis, and we will address the rest of the patterns in the following parts.

Learn Price Models in Technical Analysis Part II Models of Japanese Candles Double Part II
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