The Bullish Pennant Chart Pattern Forex Trading Strategy is based on a chart pattern called the Bullish Pennant.
Timeframes: preferably, 15mins and above
Currency Pairs: Any
Forex Indicators: none required
NEED TO HAVE SOME CLARITY HERE
Now, you should not get mixed up with bullish pennant forex chart pattern with the bull flag forex chart pattern formation, they are different but have one thing in common-they are both bullish continuation forex chart patterns.
Also do not get mixed up with the bearish pennant forex chart pattern with the bear flag forex chart pattern as they are different as well but have one thing in common: they are both bearish continuation forex chart patterns.
PENNANT FOREX CHART PATTERN vs FLAG FOREX CHART PATTERN-WHATS THE DIFFERENCE?
The only difference between a pennant chart pattern and a flag pattern is that is that a flag pattern looks more rectangular shape where as a pennant looks like a triangle. See chart below for example:
THE PENNANT CHART PATTERN
The pennant chart pattern is a common chart pattern used in forex technical analysis and it is formed when you draw two converging trendlines (see above chart).
- For a bullish pennant chart pattern to form, there has to be an existing uptrend.
- For a bearish pennant chart pattern to form, there has to be an existing downtrend.
- the formation of a bullish pennant pattern shows a period of market consolidation
- a breakout of this bullish pennant chart formation should breakout to the upside continuing the original uptrend.
- so the bullish pennant chart pattern is a bullish continuation pattern.
THE TRADING RULES
- When an uptrend has started, you wait for the bullish pennant formation to form.
- You do this by drawing two converging trendlines and wait for price to breakout of the downward trendline to the upside.
- Once price breaks out to the upside, makes sure the candlestick must close outside of the downward trendline.
- Place a buy stop order 3-5 pips above the high of that candlestick that has just closed.
- For stop loss, place it 5-10 pips below the low of that candlestick.
- Set your take profit at 3 times what your risked or use a previous swing high point and set the price level of that as your take profit target level.
- How to manage your trade: as price continues to move upward, lock in your profits by moving stop loss and trailing it behind “bottoms” that form as price continues to move up.
Here’s an example:
ADVANTAGES OF THE BULLISH PENNANT CHART PATTERN FOREX TRADING STRATEGY
- 100% Price Action Trading Based only on Price Action
- If you’ve missed an uptrend from the beginning, the bullish pennant trading strategy allows you to get in along the way.
- in a strong trending market, you will make lots of pips easily with this forex strategy.
- the bullish pennant forex chart pattern does occur regularly in all timeframes.
THE DISADVANTAGES OF THE BULLISH PENNANT CHART PATTERN FOREX TRADING STRATEGY
- Forex Technical Analysis Using Price Action Trading Is good but they will not give you 100% trading success rate (no forex trading strategy can give you a 100% rate)
- sometimes the breakout to the upside will result in a very long candlestick which means that your stop loss may be quite large so you have to decide to take this kind of trade or let it pass by or reduce the size of your contracts you trade.
- if you are not paying attention or not really focused on looking for this chart pattern, you may miss it because it does take a little bit of skill to identify it and trade it successfully.
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