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What happens after a w pattern in forex?

The W pattern is a popular technical analysis pattern used in forex trading. It is a reversal pattern that usually appears after a downtrend in the market. The pattern forms when the price action creates two valleys, followed by a higher peak, and then another dip that fails to reach the previous low, forming the second valley. This pattern signals a potential trend reversal, and traders use it to identify potential buying opportunities.

After the formation of the W pattern, traders usually wait for confirmation of the trend reversal before entering into a trade. Confirmation can be in the form of a break above the peak of the pattern, which indicates that the bulls have taken control of the market. Once the confirmation is established, traders can enter long positions, expecting the price to move upwards.

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So, what happens after a W pattern in forex?

1. Price reversal

The most significant thing that happens after the W pattern is a price reversal. The pattern signals a potential reversal of the previous downtrend, and traders expect the price to start moving upwards. This price reversal can be short-term or long-term, depending on various market factors.

2. Bullish sentiment

The formation of the W pattern is a sign of a potential trend reversal, which creates a bullish sentiment in the market. Traders who were previously bearish on the market may start buying, causing the price to move upwards. This bullish sentiment can last for an extended period, resulting in a long-term uptrend.

3. Resistance levels

After the confirmation of the W pattern, traders may observe resistance levels that the price has to break before continuing to move upwards. These levels can be identified using technical analysis tools such as Fibonacci retracement levels, pivot points, or moving averages. If the price fails to break these levels, it may indicate a potential reversal of the bullish trend.

4. Volume

Volume is an essential factor in forex trading, and it usually increases after the formation of the W pattern. A significant increase in volume indicates that traders are interested in buying, and there is a high probability that the price will continue to move upwards. However, low volume may indicate a lack of interest in the market, which can result in a reversal of the bullish trend.

5. Risk management

Risk management is crucial in forex trading, and traders should always have a plan in place to manage their risk. After the formation of the W pattern, traders should identify potential support levels where they can place their stop-loss orders to minimize their losses if the price moves downwards. Additionally, traders should also identify potential profit targets where they can take their profits if the price reaches a certain level.

In conclusion, the formation of the W pattern in forex trading signals a potential trend reversal, and traders use it to identify potential buying opportunities. After the confirmation of the pattern, traders expect the price to move upwards, creating a bullish sentiment in the market. However, traders should also be aware of potential resistance levels and manage their risk accordingly. Understanding what happens after a W pattern in forex can help traders make informed trading decisions and improve their chances of success in the market.

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