One of the four basic patterns that exist in trading, is the Drop-Base-Drop (DBD ) when trading.
You now have one of the four of the patterns that exist in trading. Any of your more complex patterns that you’ve read about consist of a series of these patterns. I intentionally chose not to label any of the “classic” technical analysis patterns. One of the more interesting things I’ve noticed from my years of trading is the desire by people to make what should be simple into something very complex.
You should see some of the complicated charts I’ve been shown! Now, I mean no disrespect to the traders out there who use multiple Fibonacci-butterfly-overbought/sold-crossing-confluence indicators to trade, provided they are making money. If you are using all of that stuff and NOT making money, perhaps you should simplify your charts! It doesn’t get much simpler than these four basic patterns.
The drop-base-drop is the exact opposite of a rally-base-rally, with the only similarity being they both form during trending movements.
Whereas a rally-base-rally structure will always form a demand zone in the market, a drop-base-drop will always form a supply zone.
Both the drop-base-drop and rally-base-rally supply and demand zones are categorically the same, they both only form when the market is trending and they are zones which if the market returns to should push the price back in the direction of the movement which created the zone.
In the image on chart, a drop lower created the supply zone so if the market was to return to this zone it should push the market lower.
You now have one of the four of the patterns that exist in trading. Any of your more complex patterns that you’ve read about consist of a series of these patterns. I intentionally chose not to label any of the “classic” technical analysis patterns. One of the more interesting things I’ve noticed from my years of trading is the desire by people to make what should be simple into something very complex.
You should see some of the complicated charts I’ve been shown! Now, I mean no disrespect to the traders out there who use multiple Fibonacci-butterfly-overbought/sold-crossing-confluence indicators to trade, provided they are making money. If you are using all of that stuff and NOT making money, perhaps you should simplify your charts! It doesn’t get much simpler than these four basic patterns.
The drop-base-drop is the exact opposite of a rally-base-rally, with the only similarity being they both form during trending movements.
Whereas a rally-base-rally structure will always form a demand zone in the market, a drop-base-drop will always form a supply zone.
Both the drop-base-drop and rally-base-rally supply and demand zones are categorically the same, they both only form when the market is trending and they are zones which if the market returns to should push the price back in the direction of the movement which created the zone.
In the image on chart, a drop lower created the supply zone so if the market was to return to this zone it should push the market lower.