Common chart patterns--Double top

Double top patterns are most commonly seen chart patterns in bar, line and candlestick charts. As the name suggest double tops will have two peaks at almost same price levels. 

Features:

• Bearish reversal signals:

Double tops are indication that the uptrend is going to change its direction.

• Formed during an uptrend:

 Double tops can be seen in an uptrend.

• Easy recognition:

Double tops also called as ‘M’ patterns can be easily identified by the M shape formed by the pattern.

Formation:

Double tops are formed when in following steps:

Moving Average--A Versatile Indicator

A very basic tool that help in forex trading is moving average (MA).

What is moving average?

Every one of you will be aware of calculating average. If you are given 10 numbers, the average of these 10 numbers is sum of all the numbers divided by 10. In same way if you are having a continous set of numbers,average of set will be different from the previous set and we can plot a graph using the average values obtained. This is called moving average

 In case of forex, the numbers you are considering for finding the average may be

• Close price
• Open price
• High price
• Low price
• Median price etc of the candles.

Types of moving average

There are several varieties of moving averages like simple moving average, exponential moving average, weighted moving average etc. Among these simple moving average and exponential moving average are the most commonly used indicators.

Simple moving average (SMA):

In a simple moving average the basic average calculation is done and graph is plotted based on the averages obtained.

Significance of SPREAD in forex trading

This article will help you to understand what is Spread and what is the real significance of spread in forex trading.

WHAT IS SPREAD?

Spread is the difference between Bid and Ask prices of a currency pair.

So what is a bid price and ask price.

Bid price is the market price at which a currency pair can be sold.

Ask price is the market price at which a currency pair can be bought.

EXAMPLE:

The above figure is a screen shot of the market window in an mt4 trading platform.

See the encircled pair, the currency pair is GBP/USD. The price of that pair can be written as

GBP/USD      :      1.4986/88.

Trend-Basics

Trend is the direction in which price moves. Identifying the trend of currency pair is the most important part of any forex trading strategy.Once you have a clear idea about where the price is heading taking a trade will be much more easier. That means if the price is going up then a buy trade will give you profit and vice-versa. So let's look at the different trends. 

Price will move mainly in 3 directions.

1. Up
2. Down
3. Range

UPTREND:

When the price is moving up it is called an uptrend.

See the above chart. The price on 8th January was around 93.83, but as on 14th January it is around 97.99. Price has moved up. This is a typical example of up trend. 

Support and Resistance

The most basic and important step during chart analysis is marking the support and resistance areas. Support and Resistance play an integral part in any successful trading strategy. So first lets look in to what is support and resistance.

Let's look in to a candlestick chart of EUR-USD.

In this chart we can see that the price is moving up.The price on 10th October was around 1.2868 and as on 17th October it is around 1.3117. So the price has moved up for about 249 pips. But the movement is not through a straight line. After 10th October the price has come down and the again went up till 11th October then again it came down and so on.The price has created a number of high's and low's before reaching the value of 1.3117.

The yellow circle you see in the chart is one such high and it is called a PEAK.