An interesting pattern

morning-news

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Even those who do not use technical analysis will like the picture below. It shows a chart of the American dollar/Canadian dollar pair. Let’s take a closer look at it.


USDCAD

USDCAD

We see a perfect example of a ‘cup’ shape. And even “cup and handle”. Indeed, if you show the picture to someone who is not a trader, they can see a cup and a handle on the right side.
Well, those who are deep into trading know this pattern very well. It is formed as follows. There is a strong downward movement. Then it stops and a flat starts. The trading volume decreases and speculators leave the instrument. At some point, an explosive price movement occurs. And it quickly moves to the levels of the previous support, from which it was declining. Then the price corrects a bit, as many traders who have been sitting on the fence have rushed to close their positions. And there is a new growth, which forms a cup’s handle on the chart.
This is the theory. And what the practice can tell us, in relation to this pair? The last review of the American dollar/Canadian dollar pair we did, when the price was right at the bottom of this pattern. More importantly, the price was near the most important round level of 1.20. We mentioned in the review that we were expecting a strong move. Either down or up. No one can know that. What is important is the other. This move will allow you to enter the position with a short stop and great profit taking potential.
Congratulations to those traders who got in on the move by placing a stop below the 1.20 level. It’s not a fact that this set-up should have worked so well. But the high take/stop ratio makes it possible to catch stops much more often and still stay with a good profit on a series of trades.
Our subscribers may ask a legitimate question. Does this pattern work on smaller timeframes. Since its formation takes a long time on the daily charts. Yes, it works on any timeframe up to M5. But, of course, the maximum profit potential is obtained by traders and investors who focus on the daily and even weekly charts.

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