Forex and Bitcoin Market – The Best Continuation Formations in Technical Analysis. These are the three most common and accurate continuation candlestick patterns in technical analysis.
Prices move in trends. And there are only three different types of trends:
In UPTREND and DOWNTREND phases, it is possible for a trader to make a profit by buying cheap and selling dear, or by selling dear and buying back cheaper later on.
The skills consist simply in recognizing and defining trends.
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In order to be successful in this, technical analysis provides effective and interesting techniques.
A key component of the trend theory is defined as a CONTINUATION FORMATION.
Such chart patterns occur during a trend which suggests that the trend will continue to develop for a
while in the existing direction.
Metaphorically speaking, by observing such patterns, one can easily jump on the bandwagon, adjust stops or simply gain assurance.
The most common continuation patterns are briefly outlined below.
- Best Time Frames: H4 and Daily
- Currency Pirs: Bitcoin and All currency pairs
The flag is a RECTANGULAR PATTERN which ideally shows up right in the MIDDLE of an established TREND.
Within a flag, a sideways consolidation evolves over a certain period of time and ends then with a breakout above or accordingly below the borders of the flag in the direction of the initial prevailing trend.
The flag has its name because it looks in the chart like a flag that is at half-mast.
Thus, if a trend exists and a flag is forming, it is assumed that the trend evolves further across the already covered initial range.
The pennant is, so to speak, a near-relative of the flag.
It is a continuation pattern which can, just like the flag, show up in the MIDDLE of a TREND.
It is also a sideways consolidation, which, however – and that is the difference – does not run within a rectangle, but between converging trend lines forming a TRINGLE.
Therefore a visual difference can be observed, which is the reason for the designation “PENNANT”.
With a successful breakout of this pattern, it is assumed that the trend will resume and cover a range at least as long as the one which preceded the occurrence of the pennant.
Unlike flags and pennants, the Breakaway Gap is not a consolidation pattern which runs over a longer period of time, but a spontaneous event.
Gaps are price breaks, which can occur after phases of a closed market.
When a gap arises in an existing trend, a strong supporting effect on the trend is attributed to it.
This also explains the origin of the name Breakaway Gap.
When such a gap occurs, it is usually linked to an event strongly influencing prices, such as a profit warning, a takeover bid or a technical trading signal in a wide timeframe.
Therefore it is possible to rely on the fact that the existing trend will resume after the occurrence of such a pattern.
CONTINUATION FORMATIONS are chart patterns in technical analysis which can occur during upward or downward trends.
They support the technical analyst in making more accurate assumptions about the existing trend.
The origin of such features lies in the fact that prices never MOVE STEADILY in one direction, but CONSOLIDATE from time to time.
That can be regarded for all practical purposes as a natural law.
Indeed it is possible to make use of this phenomenon and watch for clear continuation patterns.
They represent an important item in the toolkit of the technical analyst.