Forex encyclopedia

A number of reversal patterns is indicated in Forex: Head and Shoulders, Double top, Double bottom, Triple top, Triple bottom, Diamond. Head and Shoulders Top – is a classical reversal pattern of technical analysis, which is formed following to a long upward trend. The model is considered to be fair reliable and is often formed. But despite above-mentioned, many beginning traders do not manage to take profit using this graphic pattern. The reason is that positions are opened prior to forming this model. Let's figure out the structure of the figure and its formation on the chart of trading terminal. The model consists from three subsequent price extreme points, the middle one is higher than others (head), and the rest two are below the middle one and are roughly equal (shoulders). All three uphills are supported by the neck line.

Moving Average Envelope is a technical indicator consisting of two moving averages shifted up and down for a certain percentage. Deviation is measured from central moving average that can be put on chart. This indicator is mainly used to define borders of current price movement or as oversold/overbought indicator, when under the pressure of bears or bulls prices reach extremes. Also envelopes are good in showing market phase – under trend or flat. This figure is very similar to another equally well-know technical instrument Bollinger Bands, BB.