Lompat ke konten Lompat ke sidebar Lompat ke footer

Use of the Pennant Pattern in Trading, Must Know!!!

The Pennant pattern is a developmental pattern that appears in the forex market and is used by traders to calculate upcoming market movements. Although close to the triangle pattern, this pattern has several significant comparisons that traders need to pay attention to.

This post will discuss how to identify the Pennant chart pattern, what it means, what factors it is, and most importantly, how to use it to make more efficient trades.

What is a Pennant Pattern?

The Pennant pattern is a connection plan pattern, seen when a security deposit faces a large upward or downward movement, accompanied by a short sell-off, before continuing to move towards a similar goal. The pattern looks like a small harmonic triangle called Pennant, which is made up of many forex candles. This pattern depends on the intentions of the price movement and is generally interpreted as bearish or bullish.

When looking at Pennant's developmental patterns, you'll see the following:

  • Flag pillar: The Pennant pattern always begins with a flag pillar, which distinguishes it from other types of patterns (such as harmonic triangles). The flag pillar is an early solid action just before the harmonic triangle.
  • Breakout level: There should be 2 breakouts, one at the end of the flagpole, and another after the breakout timeframe, where the rising or falling force continues
  • The pennant itself: The pennant is a triangular pattern that is created when the market is consolidating, between the flag pillar and the breakout. 2 lines of force converge to make a triangle– Pennant.

Bullish Pennants

Bullish Pennants are a development of an interwoven candlestick pattern in a strong bullish style. The Pennant is constructed from the upper flag pillar, a period of establishment and subsequent development of ascending force after the breakout. Traders are looking for a break above the Pennant to use the recent bullish momentum.

Bearish Pennants

Bearish Pennant is the opposite of Bullish Pennant. Bearish Pennants are a pattern of joints intertwined in a strong shrinking style. This pattern always begins with a flag pillar – a sharp decline in price, accompanied by a time lag in the downward action. During this time create a triangle, which is known as the Pennant. After that there was a breakout, and action to the bottom continued. Traders like to penetrate short trades when they break at the bottom of the pennant.

Comparison Between Pennant And Triangle Patterns

The Pennant pattern is very close to the triangle pattern, but there are some significant comparisons between the Forex Pennant and the forex triangle that must be recognized in order to successfully trade using one of these patterns.

Here are some important comparisons to consider:

  • The Pennant pattern must begin with a solid rising or falling action that matches the pillar of the flag. If there is no flag pillar, then it is a triangle and not a Pennant.
  • Pennant leads make shallow retracements (generally less than 38% of flag pillars). Deep retracements are a symptom of the Pennant triangle.
  • Pennant is signaled by the development of an ascending or descending force.
  • Pennant is a short time pattern that generally lasts in one to 3 weeks. Triangular patterns generally take longer to create.

Trading Method With Pennant Bullish And Bearish

When executing trades, a similar approach can be applied to the Bullish and Bearish Pennant patterns. However, the Bullish Pennant will have a far bias and the Bearish Pennant, a short bias. The illustration in this base proves a method of trading with a Bullish Pennant appearing in the counterpart to the GBP or NZD currency.

Traders should pay close attention to traversing the trade on verification of the breakout after a sharp and instant price movement. This Pennant, after a sharp price movement, proves that there is a possibility of a breakout and development in the hopes of an early move.

A candlestick that closes above the Pennant means an opportunity entry point. In this illustration, the breakout is significant and there may be a continuous upward movement.

The stop loss can be placed at the bottom of the breakout candle, considering that it is a fairly large level or, for more conventional traders, a stop level can be placed at the bottom of the Pennant to prevent the risk of shrinkage. These generally offer a level of protection that can be obtained for the trader.

It should be noted that the market does not always move the way you expect, which is why traders should always adopt wise risk management. To address this, trade with the capital you can get if you face loss.

To decide on the target level, the trader can measure the distance from the beginning of the flag pillar to the Pennant, then duplicate this distance from the price that went to the Pennant.

Posting Komentar untuk "Use of the Pennant Pattern in Trading, Must Know!!!"