Ascending wedge bullish or bearish4/30/2024 This information has been prepared by IG, a trading name of IG Markets Limited. Learn more about pattern trading at IG Academy Trading them requires planning when to open your position, take a profit and cut a loss. Bearish pennants occur when a bear move pauses, while bullish pennants occur when bull moves pause.Pennants are a technical pattern used to identify continuations of sharp price moves.Not sure if you’re ready to commit real capital to your pennant strategy? Open an IG demo account to put it to the test with £10,000 in virtual funds. Identify bearish and bullish pennants using the IG trading platform or MetaTrader 4 (MT4).IG traders get access to thousands of markets, including forex, indices, shares Head over to IG Academy to learn everything you need to know about technical trading.How to trade bullish and bearish pennants with IG For our EUR/USD trade, for example, you might be risking 10 or 20 points in exchange for 200 points of potential profit. This is one reason why pennants are so sought after by traders – relative to other patterns, the risk-reward ratio tends to be high. With both strategies, your stop is far closer than the point at which you take profit. You’ll want to give enough room for the price to oscillate before any breakout takes hold, but not so much that your losses are too great if the pattern breaks. If you’ve waited until the market retests its old area of support or resistance, you’d place your stop a few points below your entry position. On a bearish pennant, you’d place your stop just above the resistance trendline.On a bullish pennant, you’d place your stop just beneath the support trendline.This is usually done by placing your stop at the opposite trendline: If you’ve opened your position as soon as the market breaks beyond support or resistance, then you’ll want to cut losses once it's clear that the pattern has broken. Where you place your stop will depend on your chosen entry strategy. Bullish vs bearish pennants: what’s the difference? To practise identifying and trading patterns without risking any capital, open an IG demo account today. Spotting bearish and bullish pennants can be tricky at first because the consolidation is often small when compared to the preceding price move. Once it moves outside of its support line, any sellers who have been holding back jump on – sending it to new lows. But consolidation can’t last forever, and without enough bullish sentiment to recover, the market turns bearish once more. Like with bullish pennants, this causes the market’s price to consolidate. The sellers that have pushed its price down might then back off and take profit, while bulls sense the potential for a bounce back. In a bearish pennant, strong negative sentiment causes a market to plummet lower (forming the pole). The volume then rapidly builds once the market breaks out. Like with bullish pennants, falling volume is often a good sign that a bearish pennant is forming. Like their counterpart, bearish pennants can occur over any time frame. When technical traders spot a bearish flag pennant, they take it as a sign that the downward price move is going to continue once the market breaks below its support line. They’re essentially the opposite to bullish pennants: instead of consolidating after a move up, the market pauses on a significant move down. What is a bearish pennant?Ī bearish pennant is a technical trading pattern that indicates the impending continuation of a downward price move. Those traders who have been waiting to buy the market leap in and send it skyward once more. In a bullish pennant, the positive sentiment wins out. This parity between supply and demand causes its price to consolidate. The buyers that have pushed the market higher then might back off and take profit, while bears sense the potential for a retracement. In a bullish pennant, strong positive sentiment causes a market to spike higher (forming the pole). Then, when the market begins to break out of the pattern, volume spikes. One extra clue that a bullish pennant is forming is falling volume as price consolidates.
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