What You Need To Know About Rounding Top And Bottom| KOL Forex Analysis•Jay Tun

The currency pair that you are looking at is at its all-time high. You are unsure if you should go Long right now. This pair has been exceeding expectations for some months now. Your peers have made their share and you dont want to be left out. But you are afraid.

These 2 chart patterns are extremely helpful in warning you of an upcoming reversal, allowing you to make money. They are the rounding bottom and rounding top chart patterns.

Just prior to the rounding bottom, prices could be rising or falling. At the start of the rounding bottom, prices start to fall due to heavier selling.

After some time, optimism returns and the demand pushes prices up. This results in the right side of the rounding bottom forming.

Shortly after, prices break the resistance zone (in gray) and shoot up.

Prices are rising. Optimism is high and prices seem to lack gravity. All of a sudden, prices seem to lose momentum.

Gradually, prices started to decline, forming the right side of the rounding top chart pattern. Pessimism has crept in.

Before you know it, prices plunge below the resistance zone (in gray), never turning back.

To avoid getting caught in a fake rounding top and bottom chart pattern, youll need to know the characteristics of both patterns.

Volume is a critical component in identifying these chart patterns correctly.

#1 Rounding bottom

Characteristics:

· Elongated U shape

· Must be formed at or near a significant low

o Eg. 52 week low, 10 year low

· Volume is lowest at the bottom of the pattern

o This suggests disinterest in this currency pair

· Price and volume increase after the bottom

o Buying interest has returned, more intensified, driving prices higher

#2 Rounding top

Characteristics:

· Elongated inverted U shape

· Must be formed at or near a significant high

o Eg. 52 week high, 10 year high

· Volume is lowest at the top of the pattern

o This suggests disinterest in this currency pair

· Volume increases after the top as price declines

o Buying interest has returned, more intensified, driving prices higher

#1 Breakout trade

· Watch for price to break the support/resistance zone (shown in gray)

· Enter your position according to the direction of the breakout the next session

· Set your stop loss

· Set a profit target

#2 Pullback trade

· Watch for price to break the support/resistance zone (shown in gray)

· Wait for the price to pull back to the area near the zone and enter your position the next session

· Set your stop loss

· Set a profit target

These 2 chart patterns can predict an impending reversal (change in trend). This prevents you from buying/short selling when you should be waiting to do the opposite.

As illustrated, under the right conditions, trading them can be highly profitable.

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