ADAUSDT - the Dragon

The Dragon pattern is similar to the ‘W’ pattern or the ‘Double Bottom’ pattern with a few different trading rules and targets. Inverse Dragon patterns are similar to ‘M’ pattern. Dragon patterns usually form at market bottoms. Dragon patterns work in all timeframes and in all market instruments. Like most ‘Double Bottom’ patterns, Dragon patterns present excellent trading opportunities with low risk to reward ratios. The Dragon pattern starts with a ‘Head’ formation and price declines from the head level to form two legs of the Dragon. These two legs usually form within 5% to 10% of the price difference.



The second leg has a strong indication of reversal as it posts a key reversal bar or a divergence in

any oscillator indicators. A spike in volume usually follows the price rise of the second leg. A trend line is drawn connecting the head of the Dragon to the hump. When price closes above the trend line and is confirmed by price action or divergence in any oscillator, it signals a reversal.


The second confirmation of the Dragon pattern occurs when the price closes above the hump, which is 38% to 50% of the range or the Swing High/Low between the two Dragon legs (or peaks for Inverse Dragon) from head to the low of the first leg.

Anatomy of a Dragon Pattern

A. Head of the Dragon

B. Formation of first leg

C. Hump (must be 0.38 to 0.5 of AB)

D. Second leg (can be 0.618 to 1.27 of

AB)




E. Trend line breakout (Long Trigger)

F. First target at 1.27 of CD

G. Second target at 0.886 to 1.0 of BC

H. Third target at 1.38 of AB

I. STOP: Place a stop few ticks below

the lowest low of two legs.