The most reliable forex chart patterns are found on a 4 hour chart, and include linear trend-lines and channels that reveal straight forward support and resistance areas. An issue arises in how most traders look to draw their trend-lines, and more importantly what the trend-line is trying to achieve. Some have charts that look like a bowl of spaghetti, there are so many lines and cross-over and indicators that all they need is Alfredo Sauce to make a great looking meal.

All that we should be trying to achieve from linear lines is to reveal the support and resistance areas that, for whatever reason, are important to the market in that particular time-frame. Look for the candles with long wicks, and switch to bar charts for a clear view. Do not start at the current time-frame and work back; always start from a previous support or resistance areas as far back as the standard time-frame allows, and then work forward. Working from the current time-frame and going backwards tends to slant the data, and creates patterns that a trader wants to see, rather than patterns that are actually there.

We are not looking for complex patterns when trading forex, the reason being that currency trade creates a market of need, and as such will not always draw in the momentum for complex patterns to complete. Compared to the equity market, a market of greed that allows trends to hold longer and therefore patterns to run their course, the Forex charts really should be very clean and free of clutter.

We see it every week that currency pairs move as much each day; the Average Trading Range is 0.5% on most pairs, as they do in a whole week most of the time. That confirms that complex chart patterns really may not have the percentage chance of following through in forex, as much as they would in Equity trading. A forex Swing Trade is a 2-3 day affair, compared to a 2-3 week affair in stocks.

Properly drawn linear trend-lines on a 4 Hour chart will pick up the wicks of the farthest candles, and find two price points that they have touched; a perfect trend-line offers the opportunity of revealing the third point, and that is what we are looking to trade to, bounce from, or break.

Once the trend-line is in place run a Fibonacci study from the first point of the trend-line, and link the high or low of the chart value. If the third point is also a Fib retracement area we then have a very good idea that it will hold when hit; the market will have also picked it up. Trend-lines make forex trading a lot simpler than most other markets, and certainly a lot simpler than some try to make it.

Trend-line Example: The analysis is looking for the third price point point that will confirm the line already in place, either as support or resistance, to work an Entry or Stop from. We then look for Fibonacci confirmation of the line.

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