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"The first pre-requisite to identifying a healthy pre-breakout situation is having a clearly defined barrier in the form of a support or resistance level." -2ndSkiesForex, Forum Member
When a support or resistance level breaks, the strength of the follow-through move depends on how strongly the broken support or resistance had been holding. Learn more about support and resistance here:
The hammer is a bullish reversal pattern that forms during a downtrend. It is named because the market is hammering out a bottom. The hanging man is a bearish reversal pattern that can also mark a top or strong resistance level. Learn about them here:
The inverted hammer that occurs when price has been falling suggests a reversal. The shooting star is a bearish reversal pattern that looks identical to the inverted hammer but occurs when price has been rising. Learn more about them here:
According to Scott Carney, a firm believer in harmonic price patterns, the Crab is the most accurate among all the harmonic patterns. This pattern has a high reward-to-risk ratio because you can put a very tight stop loss.
As time went by, the popularity of the Gartley pattern grew and people eventually came up with their own variations. Are you familiar with these patterns?
The inverted hammer and shooting star also look identical. The only difference between them is whether you’re in a downtrend or uptrend. Learn more about them in this #babypips lesson: