Introduction
The world of foreign exchange (Forex) trading is full of terms and concepts that can be confusing for beginners. One of these terms is “Flag Limit,” which is often used in conjunction with other terms like “FTR” and “Pole Pattern.” In this article, we will take a detailed look at what Flag Limit is, What does FTR mean and what Pole patterns are, how they are used in Forex trading, and how traders can make use of them.
What is Flag Limit?
Flag Limit is a technical analysis tool used by Forex traders to identify key support and resistance levels. The flag limit is formed when the price action of a currency pair moves within a defined range, creating a flag shape on a chart. There are two types of Flag Limit: a. Rally Base Rally (RBR): When the price action moves upward to a new high and retraces to a lower level before continuing to rise again, forming a flag shape on a chart, it is called Rally Base Rally (RBR) pattern. b. Drop Base Drop (DBD): When the price action moves downward to a new low and retraces to a higher level before continuing to fall again, forming a flag shape on a chart, it is called Drop Base Drop (DBD) pattern.
Upper Flag Limit (UFL)
The Upper Flag Limit (UFL) is the highest point of the flag shape that represents the resistance level. Traders use UFL as a selling opportunity as the price may not break through this level and may fall back to the previous resistance level.
Lower Flag Limit (LFL)
The Lower Flag Limit (LFL) is the lowest point of the flag shape that represents the support level. Traders use LFL as a buying opportunity as the price may not break through this level and may rise back to the previous support level.
What Does FTR Mean? FTR (Failure to Return) in Forex
FTR stands for Failure to Return, which is a technical analysis tool used by Forex traders. It occurs when the price action of a currency pair breaks through a key level of support or resistance but fails to return to that level. This can indicate a change in the underlying trend of the currency pair, and traders may use this as a signal to adjust their positions accordingly.
What is FTB in Forex?
FTB stands for Failure to Breakout, which is similar to FTR but in opposite direction. It occurs when the price action of a currency pair fails to break through a key level of resistance or support and returns to that level. This can indicate that the trend is not strong enough to break through the key level, and traders may use this as a signal to adjust their positions accordingly.
How to Trade FTR and FTB?
Traders can use FTR and FTB as signals to enter or exit trades. For example, if a trader observes an FTR pattern, they may take a short position on the currency pair, as the price is likely to continue to fall. Conversely, if a trader observes an FTB pattern, they may take a long position on the currency pair, as the price is likely to continue to rise.
What is Hidden FTR?
Hidden FTR occurs when the price action of a currency pair breaks through a key level of support or resistance but fails to return to that level, and then it forms another key level and breaks through it also and does not return, this pattern is called hidden FTR, and it can be a strong indication of a change in the underlying trend of the currency pair.
Difference Between FTR and Flag Limit
FTR and Flag Limit are closely related but have some key differences. It is a tool used to identify changes in the underlying trend of a currency pair, while Flag Limit is a tool used to identify key levels of support and resistance. FTR is used to indicate a possible change in the price direction, while Flag Limit is used to identify potential entry and exit points for trades. It can also be used in the bullish and bearish market, while Flag Limit is focused on price retracements.
What is Pole Pattern?
A Pole pattern is a technical analysis tool that is used to identify key levels of support and resistance by analyzing the distance between highs and lows on a chart. The pattern is formed when a move is followed by a retracement and then another move in the same direction with a similar distance and duration. Pole patterns can provide an indication of where the price may be heading, and traders use this information to enter or exit trades.
Conclusion
In conclusion, Flag Limit, FTR, and Pole pattern are all important technical analysis tools used by Forex traders to identify key levels of support and resistance and changes in the underlying trend of a currency pair. Understanding these concepts and how to use them can help traders make more informed trading decisions. However, it is important to note that technical analysis should be used in conjunction with other methods, such as fundamental analysis, to gain a comprehensive view of the market.
