Advanced Chart Pattern Recognition on Binomo

Pattern Recognition Basics

Patterns on charts are the graphical representation of changes in the mood of the binomo market, as prices draw out recognizable shapes which indicate probable directions of future price action. Patterns result from the interaction of all market participants while responding to economic news, technical levels, and psychological triggers to buy and sell. To understand contextually the patterns is as applicable as pattern recognition, with the same pattern varying in significance depending on the market context, volume profile, and underlying trend environment. Reversal signals will probably be patterns that occur following extended trends, while continuation movements can be signaled by patterns found in consolidation zones.

Reversal Pattern Mastery

Head and shoulders patterns are perhaps the most reliable reversal patterns, with the neckline breakdown providing acutely timed entry signals in addition to measured move targets. The pattern is effective because it indicates buying exhaustion during uptrends, with the successive lower highs reflecting diminishing momentum before final trend reversals. Double tops and bottoms must be validated with cautious volume analysis, as false breakouts can be anticipated in the instance of inadequate volume validation. Conform double bottom patterns tend to present decreasing volume on the second low, lower than the initial one, indicating receding selling pressure and possibly trend-turning situations.

Mastery of Continuation Patterns

Pennant and flagpole formations are brief episodes of consolidation during robust trends and are excellent risk-reward prospects in case they are properly identified. They have a duration of one to three weeks, and volume drops on consolidation and rises on breakouts in the trend direction. Triangle patterns are of several types, with ascending triangles tending to be bullish, descending triangles tending to be bearish, and symmetrical triangles taking on the character of the prior trend. Volume patterns in the formation of triangles provide useful confirmation indications for natural breakout moves.

Complex Pattern Combinations

Cup and handle patterns are a mix of reversal and continuation action, with the cup portion being base building and the handle providing final shakeout before continuation higher. Cup and handle patterns may take a few months to develop and thus are particularly useful for directional bias over the larger picture even for intraday trading. Diamond patterns are rare but very significant patterns inclined to occur at critical market turning points. These complex patterns require good-quality volume analysis and typically function as lead-ins to big price moves, so they are well worth taking the time to accurately identify and break them down.

Volume Confirmation Techniques

Pattern validity is dependent mainly on concomitant volume characteristics, with true breakouts having to occur on expanding volume and false breakouts often occurring on decreasing volume. Resolving these correlations allows one to separate true pattern completions from temporary price action that would readily reverse itself. Previous volume contributes to the context, such that tendencies that develop on high volume tend to be more predictable than those that develop under low volume market conditions. This volume analysis is carried through to the entire pattern forming process and not just to the point of the breakout.

Time Frame Pattern Analysis

Pattern reliability increases with time scale, with weekly chart patterns being more reliable than those in daily charts, which are more reliable than hourly chart patterns. However, shorter time frame patterns can create great entry points for positions constructed out of observation of longer time frame pattern action. Multi-time frame pattern convergence offers the greatest probability trade, in which multiple time frame patterns converge in the same direction bias. Convergence through this method eliminates false alarms and heightens confidence in pattern trading opportunities.

False Breakout Identification

False breakouts are one of the most frustrating aspects of pattern trading, where prices temporarily move out of pattern boundaries only to move back into the structure. New traders fall into these false moves because they go long or short too early without adequate confirmation. Volume and follow-through analysis help traders identify false breakouts early enough so that losers can be sold before losses are incurred. Real breakouts will persist for several time periods after the break, but false breakouts will reverse in one or two time periods.

Pattern Measurement Methods

Price targets derived from pattern size provide objective exit points that eliminate emotional choice in profit target selection. Most patterns also provide precise measurement techniques that calculate likely price targets based on pattern type and size. Fibonacci extensions and retracements often occur on top of pattern-based price targets, further supporting target price targets. Overlaps of multiple approaches provide greater confidence in target projections and ranking the most likely outcome situations.

Integration of Market Context

Interpretation of a pattern should also be considered in light of broader market conditions, whereby the same pattern will have different consequences based on general market direction and sentiments. Patterns that form during robust bull markets will tend to produce less severe corrections, whereas bear market patterns are likely to precipitate more violent movements. Awareness of the economic calendar foresees patterns likely to be broken by news announcements before they are finished. Patterns currently in completion before major announcements will experience false breaks as markets react to surprise announcements.

Advanced Pattern Variations

Inverse head and shoulders patterns in commodities are often concurrent with seasonal forces, creating binomo trade of higher likelihood when technical patterns overlap with fundamental seasonal forces. Such alignment possibilities are some of the finest quality risk-reward trades to be made. More sophisticated correction patterns such as triangular corrections or multiple zigzag patterns involve more sophisticated pattern recognition but are typically good trades if recognized properly.

Pattern Failure Analysis

The most frequent failure modes are absence of volume confirmation, exogenous news disturbance, and overall market conditions dominating individual pattern implications. Failure price action will often indicate new trade opportunities, as broken patterns are frequently followed by strong reversals in the opposite direction. Reversals on failure can provide excellent trading opportunities to cunning traders who perceive the changing situation in good time.