The Accumulation/Distribution (AD) study attempts to quantify the amount of volume flowing into or out of an instrument by identifying the position of the close of the period in relation to that period’s high/low range. The volume for the period is then allocated accordingly to a running continuous total. Formula AD = cumulative ((((Close – […]

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The Average Directional Movement Index (ADX) is designed to quantify trend strength by measuring the amount of price movement in a single direction. The ADX is part of the Directional Movement system published by J. Welles Wilder and is the average resulting from the Directional Movement indicators. Formula Directional Movement (DM) is defined as the […]

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Head and shoulders is a chart pattern in which a large peak has a slightly smaller peak on either side of it. Traders look at head and shoulders patterns to predict a bullish-to-bearish reversal. Typically, the first and third peak will be smaller than the second, but they will all fall back to the same […]

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Double top patterns are noteworthy technical trading structures to learn and integrate into a trader’s arsenal. Double tops can enhance technical analysis when trading both forex or stocks, making the pattern highly versatile in nature. Double Top Pattern: Main Talking Points: What is a double top? How to identify a double top pattern on forex charts Using […]

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A rounding bottom chart pattern can signify a continuation or a reversal. For instance, during an uptrend, an asset’s price may fall back slightly before rising once more. This would be a bullish continuation. An example of a bullish reversal rounding bottom – shown below – would be if an asset’s price was in a […]

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A double bottom chart pattern indicates a period of selling, causing an asset’s price to drop below a level of support. It will then rise to a level of resistance, before dropping again. Finally, the trend will reverse and begin an upward motion as the market becomes more bullish. A double bottom is a bullish […]

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The cup and handle pattern is a bullish continuation pattern that is used to show a period of bearish market sentiment before the overall trend finally continues in a bullish motion. The cup appears similar to a rounding bottom chart pattern, and the handle is similar to a wedge pattern – which is explained in […]

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Wedges form as an asset’s price movements tighten between two sloping trend lines. There are two types of wedge: rising and falling. A rising wedge is represented by a trend line caught between two upwardly slanted lines of support and resistance. In this case the line of support is steeper than the resistance line. This […]

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What is a Pennant? In technical analysis, a pennant is a type of continuation pattern formed when there is a large movement in security, known as the flagpole, followed by a consolidation period with converging trend lines – the pennant – followed by a breakout movement in the same direction as the initial large movement, which represents the second half […]

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