EUR/JPY Flag Pattern
Posted by Dennis in FOREX, Guerrilla Trading, Instruction
Noticed a flag pattern shown in following chart.
The key to this pattern is the consolidation range that is bounded and ranging counter to the preceeding trend. In this case the red arrow down shows the bearish price trend. The consolidation is illustrated with the green arrow. The trend lines are drawn by first drawing the bottom trend line from Point A to Point B. Then a parallel line is matched to Point C. The upper trend line only needs to roughly match the high points. The trade is triggered when price breaks out of the consolidation range in the same direction of the preceding trend (the flag pole if you will as represented by the red down arrow)
No sooner than I had drawn the trend lines, price broke down below the bottom trend line. At the close of the candle, I entered a short trade with the take profit at the pivot point S1. I returned to my graphics program to notate the saved chart. Also "Lost" was just starting so I didn't want to worry about the trade. (it was on my Demo account anyway so I never sweat a demo trade)
Heres the chart a couple of hours later (about 11:00 PM PDT April 15th)
My trade made its target of +40 pips. Price pulled back a little and then was dropping. If I were in a trade still my target would be S2. I expect price to go even lower still.