The M pattern, or also known as the double-top pattern, is one of the most popular techniques in trading. The reason is its efficiency in transactions of more than 70% if performed correctly. It is difficult not to if you have the right information to execute it successfully and be able to act at the right time.
For many, the pattern is perfect; however, it would be beginners to think that the method is error-free. Everything is possible in the world, even that the techniques fail at certain times. The important thing about this pattern is that it minimizes the possibility of failure and ensures that the loss is not so significant.
What is the “M” formation and how to trade it?
The M pattern is a model for trading market behaviour when a possible abrupt downturn may follow. Two high peaks in the market mark the behaviour that looks like the letter “M” in the trading charts. It is also why it’s known as a double top. The formation usually occurs in a long period of resistance, until it collapses.
The detail with the M pattern is to know how to recognize it in time and be able to have patience and know-how to wait. There are many possible M-patterns to be found along the way, but they are traps that can cause a considerable loss. On a path with downward resistance, you may find many peaks, but they will not be the right ones.
For the M-pattern, it is advisable to wait until the descent process starts before making any transactions. Some experts recommend waiting until you are close to the point of loss and secure transactions.
Other experts think that it is better to take out the accounts not monetarily but as a percentage. The method is similar, but try to estimate what minimum rate you want to earn in trading and sell at that point. It is a way to generate income and be in a very favourable position for a new trading period.
Avoid these common mistakes with the “M” pattern
For both monetary and percentage form, you must be about the fact that something can go wrong. Therefore it is a matter of taking specific forecasts, the first being not to sell at the peaks. It is the first mistake of beginners to sell at the highs thinking that they are the highest-probability points to sell the market.
The second common mistake is to think that the M and W patterns follow the same rules of behaviour and norms. While that is true to a large extent in the Forex market, it is not the case with other markets such as stocks or commodities. Although they may seem similar, the behavior of both formations tends to be different, as well as the timing for trading. Except in the Forex market, it is not advisable to apply the M pattern as if it were a W pattern.
Keep in mind that the trade setups can fail as with any other trading tool
You can apply these concepts and methods, but as said before, there is a success rate of around 70%. It implies a 30% failure rate at the time of making a transaction with this technique. In short, it is not infallible, and it carries its risks, which we should try to reduce as much as possible with other available tools.
Another critical factor is taking into consideration your past experiences or those of your mentor, if you have one. It is essential to be able to foresee and develop the instinct of when to make a valid transaction with the M formation.
Related education and FX know-how:
Trusted FX Brokers
Haven't found what you're looking for? Contact us!
Forex Education - Basics:
Free Forex eBooks:
Forex Education - FX Brokers:
Forex Education - Technical Analysis:
Forex Education - Money Management:
Forex Education - Psychology:
Forex Education - Others:
Forex Interbank Trading: