QM Pattern and qm forex: Trading tools that investors must know

Trend trading requires an understanding of various price patterns, and one pattern that should not be overlooked is the QM Pattern or Quasimodo Pattern. It is a tool that helps traders accurately identify reversal points in the trend. Although it is a relatively new pattern and has not yet gained widespread attention like other patterns, the importance of the QM forex pattern lies in its accuracy and effectiveness in analyzing market trend changes.

Getting Started: What is the QM Pattern?

When it comes to price patterns in the financial markets, most traders think of Head and Shoulders or Triangle patterns. However, the QM Pattern remains a secret among experts. Its name is derived from the character Quasimodo from the novel “The Hunchback of Notre-Dame,” because the Quasimodo Pattern has an asymmetrical appearance, with the right shoulder being higher or lower than the left shoulder.

A key difference of the QM forex pattern is that during the formation of a Head and Shoulders, the price often breaks through the neckline sharply before bouncing back to form an unbalanced right shoulder. This movement is a significant signal indicating a potential trend reversal.

Structural Characteristics: Looks Like a Head and Shoulders but Not Natural

The QM Pattern is formed by a sequence of high and low points, consisting of three main points, similar to the Head and Shoulders pattern. First, the price creates a Lower Low (new low point) or a Higher High (new high point) depending on the trend. Then, a rebound or correction occurs, testing the previous significant level. After this test, the price forms a Higher Low (raised low point) or a Lower High (lower high point), signaling a trend change.

This pattern can appear in both bullish and bearish markets. In a downtrend, the Bullish QM Pattern appears when the trend is transitioning from down to up. Conversely, the Bearish QM Pattern appears in an uptrend when the trend is about to reverse downward.

How It Works: Based on the Dow Theory

To understand how the QM forex pattern works, we need to understand the (Dow Theory), which is the foundation of all technical analysis. This theory states that trends tend to continue until clear signals indicate a reversal.

In an uptrend, prices will form Higher Highs and Higher Lows continuously. When a Lower Low is formed, it indicates the uptrend is weakening. Similarly, in a downtrend, prices will form Lower Lows and Lower Highs.

A Bullish QM Pattern occurs when, in a downtrend, the price creates a Lower Low at the bottom (head) and then rebounds to form a Higher High above the previous point, before retracing but not falling below the left shoulder’s low. This indicates that selling pressure is gradually weakening.

Conversely, a Bearish QM Pattern occurs when, in an uptrend, the price forms a Higher High, then retraces to create a Lower Low below the previous low, before bouncing back but not exceeding the left shoulder’s high. This indicates weakening buying strength.

Trading QM Pattern with Demand and Supply Zones

The most effective application of the QM forex pattern is in conjunction with Demand and Supply Zones. A Demand Zone is a price area with strong buying pressure (support), while a Supply Zone is an area with strong selling pressure (resistance).

Bullish QM Pattern Trading

When the pattern enters its third phase (right shoulder), the price will create a Higher High. Then, it retraces but remains above the Higher Low level. Traders should wait until the price tests the Demand Zone at the level of the left shoulder. This point serves as an entry for (Buy).

Set a stop loss (Stop Loss) slightly below the lowest point (Head) of the pattern. Take profit (Take Profit) should be placed when the price starts moving past the previous Higher High.

Bearish QM Pattern Trading

In a downtrend, the price reaches the right shoulder by creating a Lower Low before rebounding. At this point, traders should wait for the price to test the Supply Zone at the level of the Lower High (left shoulder), as this is a good short entry point (Short Entry).

Place a stop loss slightly above the head’s high (Head), and set a take profit when the price breaks below the previous Lower Low.

Precautions When Using the QM Pattern

It is important to remember that the QM Pattern is a technical analysis tool, not a guarantee. Its main limitation is when used on assets with low trading volume (Low Liquidity). In such cases, the price pattern may occur not due to genuine market forces but as a result of trading by a small number of players.

Always check the trading volume at each stage of the pattern. If the volume is insufficient, be cautious as the signal may be false (False Signal).

Summary: QM Pattern as a Trader’s Additional Tool

The QM Pattern, or Quasimodo Pattern, features asymmetrical head and shoulders. It is a price pattern confirmed by Dow Theory and supported by supply and demand principles. Although it is relatively new, the accuracy of the QM forex pattern makes it effective for analyzing trend reversal points.

Using the QM Pattern together with Demand and Supply Zones is a powerful strategy. However, like any other tool, it requires careful volume analysis and cautious interpretation. Success in trading does not rely solely on a single tool but on a combination of knowledge, discipline, and good risk management.