Strategy model - basic framework V1I am developing this 3 stage manual trading strategy model based on trend trading and break and re-tests for 1:1 trades with TP set equidistant to the SL.
Double Top or Bottom
Why You Should Avoid Trading Standard Patterns: Deeper AnalysisTrading based on technical analysis is a popular way for traders to identify market opportunities. One of the most common methods of technical analysis is the use of chart patterns. These patterns are recognizable formations created by price movements on a chart.
Traders use these patterns to identify potential areas of support and resistance, as well as trend reversals. However, there are several reasons why you should avoid trading standard patterns:
1. Widespread Awareness and Anticipation:
Standard patterns are well-known and widely anticipated by market participants. This means that they are already priced in, making trading them a low-probability strategy.
2. Potential for False Signals:
The formation of a pattern on a chart does not guarantee the expected outcome. In fact, standard patterns can often lead to false breakouts and failed trades.
3. Difficulty in Trading Effectively:
Trading standard patterns effectively requires a high level of skill and experience. Without a deep understanding of market structure and price behavior, traders can easily fall victim to false signals and whipsaws.
Advantages of Trading Liquidity Patterns:
Liquidity patterns offer a more effective and reliable alternative to standard patterns. These patterns are based on the concept of market liquidity, which refers to the ease with which an asset can be bought or sold without impacting its price. By identifying areas of high and low liquidity, traders can gain an edge in the market.
In-depth Analysis of Popular Patterns:
1. Double Bottom:
The classic double bottom pattern is a bullish reversal pattern that forms when the price of an asset makes two consecutive lows at the same level, followed by a rally.
However, the standard double bottom pattern has a significant drawback: it leaves liquidity below the lows, which can lead to false breakouts and failed trades.
A more effective way to trade this pattern is to look for a lower low. This occurs when the price makes a new low below the previous two lows. This indicates that the market is absorbing all the sell liquidity and is ready to move higher.
2. Triangle:
A triangle is a consolidation pattern that forms when the price of an asset ranges between two converging trendlines.
Traders often look for breakout trades in triangles, but this can be risky.
False breakouts are a common occurrence in triangle patterns.
This is because market makers often manipulate the price to induce traders to break out of the pattern, only to reverse the price and trap them in losing trades.
A more effective way to trade triangles is to look for liquidity grabs. This occurs when the price moves outside of the triangle, only to quickly return back inside. This indicates that market makers are taking liquidity from the market and are preparing to move the price in the opposite direction.
Practical Tips for Trading Liquidity Patterns:
Always trade with the trend. Liquidity patterns are most effective when they are traded in the direction of the overall trend.
Use stop-loss orders to protect your downside. This will help to limit your losses if the trade does not go your way.
Be patient and wait for the right setup. Don't force trades and only take those that meet your criteria.
Additional Considerations:
Market context: It is important to consider the overall market context when trading liquidity patterns. For example, patterns are more likely to be successful in trending markets than in range-bound markets.
Risk management : Always use sound risk management principles when trading, regardless of the pattern you are using. This includes using stop-loss orders and position sizing appropriately.
False signals: It is important to be aware of the potential for false signals when trading liquidity patterns. Not all patterns will lead to successful trades, and it is important to be prepared for losses.
How Buyers Trapped Beautiful Chart to Learn .
I can discuss this chart with you for a longer period of time because there is so much learning in this chart, why this chart is important for a Trend follower,
for a candlestick pattern (Bullish bearish Engulfing, Doji, Three Black Crow, etc.)
and for a pattern lover( Channel, Wedge, Pennant, Triangle, Rectangle) because it has everything in the chart but how to have a close eye without getting biased each and every time you just need to perform your learning without any emotions.
on 16 June 2022, the candle is made telling everybody that the trend has been changed
from there on-wards, if you place have Fibonacci almost each and every time it gets retraced from 50% so on and so forth at held its direction firm and it does the same which a trend should do.
From November 4th onwards again continues in its original direction
if you think that the 3rd October candle is telling you to change the direction, but when you see the 22nd September candle you will understand that on 3rd October the candle which has complete buyers is still overshadowed by the 22 September candle, this tells that trend is still Bearish.
the most interesting part happened from 20 December 2022 to 2nd of March
when the price was in the Zone of (0.67750-0.69735)
where I think how they Created Buyers Trap each and every time and how high frequency trades each and every time were placed there because there were limit orders placed and each and every time they fill the orders you can see just by looking at the wicks,
you can clearly see if buyers have potential then they could break the upper part of the rectangle which was made by the price but couldn't hold Levels
if you see 27 February to 3rd March then you can clearly see they again established the bearish Phase and they had the upper hand so they Take the price Down and Broke the recently made support Zone which is around 0.67750
and when they broke its level there is a Marubozu candle just telling you completely that sellers are in full control.
There is so much in this chart Learn and Practice.
Please Watch Closely and there is So much.
Gratify if you appreciate the practice then you can like it, share it and
If you want me to investigate any chart for you then would cherish doing that for you.
Thank you for your time and support.
Stay safe.
Learn to identify some useful Chart patterns, Merry Christmas🎄 Unlocking the Secrets of Chart Patterns: Navigating Market Trends 📈
Season's Greetings to all our readers! As we celebrate the spirit of the holidays, let's delve into the fascinating world of financial markets. In our journey to understand and navigate the complexities of trading and investing, we've touched upon essential chart patterns that can serve as invaluable guides for market enthusiasts.
In the midst of the festive cheer, let's revisit some of these powerful indicators: the Double Bottom, Flag and Pole, Bullish Pennant, Rising Wedge, Falling Wedge, Triple Top, and Inverted Head and Shoulders. Understanding these patterns can be akin to unwrapping gifts of insight into potential market movements.
So, grab a cup of cocoa, settle into your favorite chair, and join us as we explore the significance of these chart patterns and share practical tips on incorporating stop-loss strategies to enhance your trading toolkit.
Wishing you a Merry Christmas filled with joy, warmth, and prosperous insights in the financial markets! 🎅🎁🚀
Double Bottom:
Description: Imagine a smiley face turned upside down. A double bottom is a chart pattern that looks like two rounded troughs (bottoms) next to each other.
Interpretation: Indicates a possible reversal of a downtrend. The price has tried to go down twice but failed, suggesting a potential upward movement.
Stop-Loss Tip: One can place a stop-loss slightly below the lowest point of the double bottom. If the price falls below this level, it may invalidate the pattern.
Flag and Pole:
Description: Think of a flag on a flagpole. The "pole" is a strong, quick price movement, and the "flag" is a rectangular-shaped consolidation pattern.
Interpretation: The flag and pole pattern often signals a continuation of the previous trend. The flag represents a brief pause before the price resumes its original direction.
Stop-Loss Tip: One should set a stop-loss just below the lower end of the flag. If the price drops below this level, it might suggest a reversal of the trend.
Bullish Pennant:
Description: Similar to the flag and pole but with a small symmetrical triangle (pennant) instead of a rectangle.
Interpretation: Indicates a temporary consolidation after a strong upward movement. It suggests that the bullish trend might continue after the brief pause.
Stop-Loss Tip: Place a stop-loss under the lower trendline of the pennant. A break below this line could signal a potential trend reversal.
Rising Wedge:
Description: Picture a triangle with its top side steeper than the bottom side. The price makes higher highs and higher lows but in a narrowing range, with indicator making Lower Highs (Bearish Divergences).
Interpretation: This pattern can indicate a potential reversal to the downside. It suggests that the buying interest is weakening, and the price may soon decline.
Stop-Loss Tip: Place a stop-loss just above the last price swing high of the wedge. If the price drops below this line, it may suggest a potential reversal.
Falling Wedge:
Description: Similar to the rising wedge but inverted. The top side is less steep than the bottom side.
Interpretation: Represents a potential reversal to the upside. It suggests that selling pressure is weakening, and the price may be ready to move higher.
Stop-Loss Tip: Place a stop-loss just below the last price swing low of the wedge. If the price drops below this line, it may suggest a potential reversal.
Triple Top:
Description: Visualize a horizontal line touching the tops of three consecutive peaks.
Interpretation : Indicates a possible reversal of an uptrend. The price has failed to break above a certain level three times, suggesting a potential downturn.
Stop-Loss Tip: One should set a stop-loss slightly above the highest point of the triple top. If the price rises above this level, it may negate the pattern.
Inverted Head and Shoulders:
Description: Picture three troughs, where the middle one (head) is lower than the two on either side (shoulders).
Interpretation: This pattern suggests a potential reversal from a downtrend to an uptrend. It signifies a shift in momentum from bearish to bullish.
Stop-Loss Tip: One should place a stop-loss just below the neckline (the line connecting the highs of the pattern). If the price falls below this line, it might indicate a failed reversal.
I am not Sebi registered analyst. My studies are for educational purpose only.
Please Consult your financial advisor before trading or investing. I am not responsible for any kinds of your profits and your losses.
Most investors treat trading as a hobby because they have a full-time job doing something else.
However, If you treat trading like a business, it will pay you like a business.
If you treat like a hobby, hobbies don't pay, they cost you...!
Hope this post is helpful to community
Thanks
RK💕
Disclaimer and Risk Warning.
The analysis and discussion provided on in.tradingview.com is intended for educational purposes only and should not be relied upon for trading decisions. RK_Charts is not an investment adviser and the information provided here should not be taken as professional investment advice. Before buying or selling any investments, securities, or precious metals, it is recommended that you conduct your own due diligence. RK_Charts does not share in your profits and will not take responsibility for any losses you may incur. So Please Consult your financial advisor before trading or investing.
The Best Strategy to Apply Trailing Stop Revealed
Hey traders,
In this post, I will share with you my strategy to apply a trailing stop.
Please, note that I am applying a trailing stop only in trend-following trades and only when a trade is opened on a key level. I trade price action patterns, so the following technique will be appropriate primarily for price action traders. Moreover, my entries are strictly on a retest.
1️⃣
Spotting a price action pattern, I am always waiting for its neckline breakout. (if we talk about different channels, then by a neckline we mean its trend line)
Once I see a candle close below/above the neckline, I set my sell/buy limit order on a retest.
Stop loss will strictly lie below the lows of the pattern if we buy and above the highs of the pattern if we sell.
I spotted a horizontal trading range on an hourly time frame on AUDUSD. I set a sell limit order after a breakout of its neckline. Stop loss is lying above the highs of the pattern.
2️⃣
Once we are in a trade, you should measure the pattern's range (distance from its high to its low based on wicks) and then project that range from the entry to the direction of the trade.
In the picture above, the pattern range and its projection are the underlined blue areas.
Once the price reaches the projection of the pattern's range, you should move your stop loss to entry and make your position risk-free.
Move stop to breakeven in traders' slang.
3️⃣
Then you should let the market go.
📈If you are holding a long position, you should let the market retrace and set a higher low and then a new higher high or AT LEAST an equal high. Once these conditions are met, you can trail your stop and set it below the last higher low.
📉If you are holding a short position, you should let the market retrace and set a lower high and then a new lower low or AT LEAST an equal low. Once these conditions are met, you can trail your stop and set it above the last lower high.
In the example above, stop loss was modified when the price set a new lower high. Stop loss is now lying above that.
Catching a trending market you should trail your stop based on new higher lows / lower highs that the price sets. Occasionally you will catch big winners.
How do you apply a trailing stop?
❤️Please, support my work with like, thank you!❤️
Decoding Market Patterns:10 Essential Price Patterns Every TradeIn the intricate world of trading, price patterns are the footprints left by market sentiment. Understanding these patterns is like deciphering a complex code, revealing insights into potential market movements. Today we will explore 10 essential price patterns every trader should recognize. Each pattern is a chapter in the dynamic story of market behavior, offering opportunities to identify trends, reversals, and strategic entry or exit points.
1. Bull Flag: The Flagbearer of Continuation
A Bull Flag is a continuation pattern, often seen in strong uptrends. It resembles a flagpole (the initial price spike) followed by a rectangular flag (consolidation phase). When the price breaks above the upper boundary of the flag, it signals a potential continuation of the uptrend.
2. Bear Flag: The Bearish Counterpart
The Bear Flag is the opposite of the Bull Flag. It appears in downtrends, with a flagpole representing the initial price drop followed by a consolidation period. When the price breaches the lower boundary of the flag, it indicates a potential continuation of the downtrend.
3. Head and Shoulders: The Classic Trend Reversal
The Head and Shoulders pattern is a powerful reversal indicator. It consists of three peaks – the central peak (head) is higher than the surrounding peaks (shoulders). When the price drops below the neckline (a line drawn through the lowest points of the shoulders), it suggests a potential trend reversal from bullish to bearish.
4. Inverse Head and Shoulders: The Bullish Resurgence
The Inverse Head and Shoulders pattern is the bullish counterpart of the Head and Shoulders. It occurs after a downtrend and indicates a potential reversal to an uptrend. The pattern consists of three troughs – the central trough (head) is lower than the surrounding troughs (shoulders). When the price rises above the neckline, it signals a potential shift from bearish to bullish.
The cool thing about chat patterns is that they are everywhere. You often see many different chart patterns on a singular chart, or smaller patterns that are a part of a larger pattern. The tricky part is finding them and appropriately identifying them.
5. Double Top: The Bearish Reversal Duo
A Double Top pattern occurs after an uptrend and signals a potential reversal. It consists of two peaks at nearly the same price level, indicating a struggle to push the price higher. When the price falls below the trough between the peaks, it suggests a possible shift from bullish to bearish.
6. Double Bottom: The Bullish Reversal Duo
The Double Bottom is the bullish counterpart of the Double Top. It occurs after a downtrend and signals a potential reversal to an uptrend. It consists of two troughs at nearly the same price level, indicating a struggle to push the price lower. When the price rises above the peak between the troughs, it suggests a potential shift from bearish to bullish.
7. Rising Wedge: The Rising Price Constrictor
A Rising Wedge is a bearish continuation or reversal pattern. It can form during a downtrend or in an uptrend where buying pressure becomes exhausted. The wedge is characterized by converging trend lines that slope upward. While the price may make higher highs and higher lows, the pattern tightens, indicating weakening momentum. When the price breaks below the lower trendline, it suggests a potential continuation of the downtrend or reversal of an uptrend.
Rising Wedge Reversal Example:
Rising Wedge Continuation Example:
8. Falling Wedge: The Falling Price Constrictor
The Falling Wedge is the bullish counterpart of the Rising Wedge. It forms during an uptrend or a downtrend, characterized by converging trend lines that slope downward. While the price may make lower highs and lower lows, the pattern tightens, indicating weakening selling pressure. When the price breaks above the upper trendline, it suggests a potential continuation of the uptrend.
Falling Wedge Continuation Example:
Falling Wedge Reversal Example:
9. Symmetrical Triangle: The Balance of Bulls and Bears
A Symmetrical Triangle is a neutral pattern that forms during a trend, indicating a period of consolidation. It is characterized by converging trend lines that slope in opposite directions. When the price breaks above the upper trendline, it signals a potential bullish move, and when it breaks below the lower trendline, it signals a potential bearish move.
10. Pennant: The Brief Consolidation Pause
A Pennant is a continuation pattern that forms after a strong price movement. It resembles a small symmetrical triangle, indicating a brief consolidation before the previous trend resumes. When the price breaks above the upper boundary, it suggests a potential bullish continuation, and when it breaks below the lower boundary, it suggests a potential bearish continuation.
Important Thing To Consider:
Price patterns are a tool that if practiced and executed properly can be a great asset for any trader. There are a few things that all traders should keep in mind when using price patterns to make trading decisions.
Context is critical: Price patterns don't exist in isolation; they occur within the context of larger market trends. It's essential to consider the prevailing market conditions, including the overall trend (bullish, bearish, or sideways), volume trends, and recent price action.
Confirmation is Key: While recognizing a price pattern is an important skill, relying solely on its formation might lead to premature or false trades. Traders should always wait for confirmation signals before taking action. Confirmation can come in the form of a price breakout above a pattern's resistance level, a significant increase in trading volume confirming the pattern's direction, or additional technical indicators aligning with the pattern's signal. Waiting for confirmation helps traders filter out false signals, reducing the risk of entering trades based solely on pattern
Risk management is paramount: No pattern, regardless of its historical accuracy, guarantees a profitable trade. Traders must always implement proper risk management strategies, including setting stop-loss orders and defining acceptable levels of risk per trade as a percentage of their trading capital. Risk management ensures that even if a trade based on a price pattern fails to materialize as expected, the impact on the trader's overall portfolio remains manageable.
Practice, practice, practice: Identifying price patterns is a skill that improves with practice and experience. Traders should dedicate time to studying historical charts, both in live markets and during backtesting. Regularly practicing pattern charting enhances the ability to spot patterns quickly and accurately. TradingView offers a great set of tools to help anyone get started by offering a full line of automated pattern recognition indicators for educational and research use. Utilizing these automated pattern recognition indicators is a great way to visualize patterns in the real world as patterns are often less clean than textbook examples.
Recognizing these price patterns equips traders with a valuable skill set for navigating a dynamic market. However, it's vital to remember that patterns, like pieces of a puzzle, offer meaningful insights when combined with other indicators and thorough analysis. No single pattern guarantees profits, and each should be evaluated within the context of the broader market conditions. By integrating pattern recognition into a holistic trading strategy, traders can unlock the door to more informed, confident, and strategic trading decisions. Happy trading!
Ben with LeafAlgo
Double Top vs. Double Bottom PatternsHello traders and investors! If you appreciate our charts, give us a quick 💜💜.
Trading double tops and double bottoms is a common strategy in technical analysis used by traders to identify potential trend reversal points in financial markets. These patterns can occur in various timeframes and on different assets, including crypto, stocks, forex, and commodities. Here's a guide on how to trade double tops and double bottoms:
1. Identify the Double Top and Double Bottom Patterns:
🔺🔺 Double Top: This pattern forms after an uptrend and consists of two peaks at approximately the same price level, separated by a trough in between. It indicates that the uptrend may be losing momentum.
🔻🔻 Double Bottom: This pattern forms after a downtrend and consists of two troughs at approximately the same price level, separated by a peak in between. It suggests that the downtrend may be losing strength.
2. Confirm the Pattern:
Look for confirmation of the pattern through other technical indicators such as volume, trendlines, and oscillators (e.g., RSI, MACD). Confirmatory signals can increase the reliability of the pattern.
3. Entry and Exit Strategies:
Entry: For a double top pattern, consider entering a short (sell) position when the price breaks below the trough that separates the two peaks. For a double bottom pattern, consider entering a long (buy) position when the price breaks above the peak that separates the two troughs.
Stop-Loss: Always set a stop-loss order to limit potential losses. Place it above the double top (for short positions) or below the double bottom (for long positions) to protect your trade.
Take Profit : Determine your profit target based on factors such as the depth of the pattern and overall market conditions. You can use support and resistance levels or Fibonacci retracement levels as potential profit targets.
4. Risk Management:
Ensure you use proper risk management techniques, such as position sizing, to protect your capital. Avoid risking more than a 10% of your trading capital on a single trade.
5. Timeframe Considerations:
Double top and double bottom patterns can appear on various timeframes. Shorter timeframes (e.g., 1-hour, 4-hour) may provide more opportunities but are also more prone to false signals. Longer timeframes (e.g., daily, weekly) may offer more reliable signals but fewer trading opportunities.
6. Monitor for False Breakouts:
Be aware of false breakouts where the price briefly penetrates the pattern's neckline (the level that separates the two peaks or troughs) but then reverses. False breakouts can occur, so it's essential to monitor the price action closely.
7. Practice and Analysis:
Backtest the double top and double bottom patterns on historical data to gain confidence in your trading strategy. Continuously analyze your trades and adapt your strategy as needed.
8. Combine with Other Indicators:
Consider using other technical indicators, such as moving averages, Bollinger Bands, or Fibonacci retracements, in conjunction with double tops and double bottoms to enhance your trading strategy.
Remember that no trading strategy is foolproof, and there are always risks involved in trading financial markets. It's essential to have a well-thought-out trading plan, manage your risk, and practice discipline to become a successful trader. Additionally, consider seeking advice from experienced traders or financial professionals before implementing any trading strategy.
Triple Top vs. Triple Bottom PatternsTechnical analysis is a crucial aspect of trading, allowing traders make decisions based on patterns and indicators in price charts. Two common patterns that traders often encounter are the triple top and the triple bottom . These patterns can provide valuable insights into potential trend reversals in the market. In this article, we'll explore what these patterns are, how to identify them, and how to trade them effectively.
Triple Top Pattern
What is a Triple Top Pattern?
A triple top pattern is a bearish technical signal characterized by three peaks of approximately equal height on a price chart. This pattern typically emerges after a strong uptrend, indicating a potential trend reversal to the downside, also known as a bearish trend. The reason for this reversal lies in the fact that the price has attempted multiple times to surpass the peak but has failed due to insufficient buying interest at that price level.
Identifying a Triple Top
Observe three distinct peaks of nearly identical height on the price chart.
Ensure that these peaks follow a clear uptrend.
Draw a horizontal line across all three peaks to determine the resistance level.
The resistance level represents the price that must be breached for the asset to continue rising. If the price fails to break this level, it is likely to trend downward.
Trading a Triple Top Pattern
When trading a triple top pattern:
- Consider entering a short position (selling with the intention to buy back) only when the price breaks through the support level, signaling the completion of the pattern and a potential price decline.
- Look for strong trading volume accompanying the price drop to confirm the reversal. Weak volume may result in an unexpected price movement.
Triple Bottom Pattern
What is a Triple Bottom Pattern?
Conversely, a triple bottom pattern is a bullish technical indicator characterized by three troughs of similar height on a price chart. This pattern emerges after a strong downtrend, suggesting a potential trend reversal to the upside, known as a bullish trend. In this case, the price has attempted multiple times to fall further but is supported by a consistent level of demand, preventing it from declining.
Identifying a Triple Bottom
Look for three distinct troughs of approximately equal depth on the price chart.
Ensure that these troughs follow a clear downtrend.
When these conditions are met, it indicates that buyers are stepping in to prevent further price declines, creating a strong support level.
Trading a Triple Bottom Pattern
When trading a triple bottom pattern:
- Consider entering a long position (buying with the intention to sell at a higher price) when the price rises above the resistance line.
- Confirm the trend reversal by monitoring trading volume. A significant increase in volume can validate the upward movement.
Triple top and triple bottom patterns are valuable tools for traders, as they provide insights into potential trend reversals. These patterns reflect the dynamic interplay between buyers and sellers in the market and can be highly profitable when identified correctly. However, it's essential to remember that they can be challenging to spot early on and may transform into different patterns if not fully formed.
As with any technical tool, triple top and triple bottom patterns should not be used in isolation. They are not fail-proof and should be complemented by other forms of analysis and risk management strategies.
UNLOCKING THE SECRETS OF DOUBLE BOTTOM PATTERN IDENTIFICATION
Before we delve into the double bottom analysis, I want to take a moment to express my immense gratitude to lucemanb for his exceptional creation of the zigzag indicator. This remarkable tool has become an integral part of my daily trading routine, aiding me in identifying critical price points and potential reversals.
Additionally, I must extend a heartfelt acknowledgment to (www.tradingview.com) for offering an extraordinary platform that empowers traders like myself to conduct in-depth chart analysis. This platform serves as an invaluable canvas where I can chart patterns, draw trendlines, and analyze price movements with precision.
In the world of trading, collaboration and innovation are paramount, and both lucemanb's contribution and (www.tradingview.com)'s platform play a pivotal role in enhancing my trading experience. As we venture into the analysis of the double bottom pattern, let's remember the collective effort that goes into creating a successful trading strategy.
Without further ado, let's immerse ourselves in the fascinating realm of double bottom patterns.
Key Characteristics to Look for When Identifying a Double Bottom Pattern:
- Two Troughs: The pattern consists of two distinct troughs (lows) formed on the price chart. These troughs are relatively similar in height and depth.
- Similar Lows:The two troughs are usually at or near the same price level, indicating a potential support area where buying interest is strong.
- Peak between Troughs: Between the two troughs, there is a peak (high) that separates them. This peak represents a resistance level that needs to be broken for the pattern to confirm.
- Neckline: Draw a straight line connecting the two peaks that occur between the troughs. This line is referred to as the neckline. A break above the neckline confirms the double bottom pattern.
- Volume: Volume can provide additional confirmation. Generally, there is higher trading volume during the formation of the first trough, followed by a decrease in volume during the period between the troughs. Volume then increases again when the price breaks above the neckline.
- Pattern Duration:*The time between the two troughs can vary, but a longer duration between the troughs can add more significance to the pattern.
- Price Target: To estimate the potential price target after the pattern confirms, measure the vertical distance from the neckline to the lowest trough, and project that distance upward from the breakout point.
- Confirmation: The pattern is confirmed when the price breaks above the neckline. This breakout should ideally be accompanied by increased volume, indicating strong buying interest.
Double Bottom Identification Using Zigzag Indicator and Time:
Identifying double bottoms requires a meticulous understanding of price action as well as the strategic use of tools like the zigzag indicator. Here's how you can effectively identify double bottoms using the zigzag indicator, while also considering the element of time:
1. Price Action and Zigzag Indicator:
The zigzag indicator is a valuable tool that assists in filtering out minor price fluctuations, enabling us to focus on significant price reversals. When searching for double bottoms, follow these steps:
- Apply the zigzag indicator to your chart. This will help you visualize the highs and lows in a clearer manner.
- Double bottoms are characterized by two distinct troughs that form at roughly the same level, followed by a bullish move. The zigzag indicator can aid in pinpointing these key troughs and peaks.
- As the zigzag indicator connects these significant lows and highs, pay attention to the symmetry between the two troughs. They should be relatively similar in height and shape, signifying a potential double bottom pattern.
2. Time Element:
While price patterns are crucial, the time element can provide additional confirmation for your analysis:
- Observe the timeframe in which the double bottom pattern is forming. A longer timeframe can add more significance to the pattern, making it more reliable for potential trades.
- Pay attention to the time duration between the two troughs. The troughs should not be too close together, suggesting a possible continuation pattern instead of a reversal. On the other hand, they shouldn't be too far apart, as that might weaken the pattern's effectiveness.
Incorporating both price analysis through the zigzag indicator and the time element enhances your ability to identify reliable double bottom patterns. Combining these aspects can provide a well-rounded view of the market, helping you make more informed trading decisions. Remember that thorough analysis and confirmation are key to successful trading outcomes.
You can refine your double bottom pattern identification by considering the relationship between the second bottom and the first trough. Here's how you can incorporate the 90% to 110% range for the formation of the second bottom:
1. First Bottom and Zigzag Indicator:
As mentioned earlier, use the zigzag indicator to identify the significant lows and highs on your chart.
2. Second Bottom Formation:
To enhance your double bottom identification process:
- Peak to First Trough: Measure the distance from the peak between the two troughs to the lowest point of the first trough.
- 90% to 110% Range: Calculate 90% and 110% of the measured distance. These values represent the allowable range for the formation of the second bottom.
3. Second Bottom Confirmation:
With this range in mind:
- Verify that the formation of the second bottom falls within the 90% to 110% range from the peak to the first trough.
- This ensures that the second bottom is approximately in line with the first trough, supporting the characteristics of a classic double bottom pattern.
Once you've identified a potential double bottom pattern, it's crucial to wait for the confirmation of the pattern through a breakout above the neckline. Here's how you can set up your trading strategy based on this confirmation:
1. Double Bottom Identification:
Follow the steps outlined earlier to identify the double bottom pattern, ensuring that the two troughs are relatively symmetrical and occur near the same price level.
2. Draw the Neckline:
Draw a straight line connecting the two peaks (highs) that occur between the troughs. This line represents the neckline of the pattern.
3. Confirmation:
For the pattern to be confirmed, the price needs to break decisively above the neckline. This breakout signifies that the bullish momentum is strong enough to push the price higher, indicating a potential trend reversal.
4. Entry Strategy:
After the breakout above the neckline, consider the following entry strategies:
- Pullback: Wait for a pullback to the neckline or the breakout point. This can provide a better entry price and reduce the risk of entering at the top of the breakout candle.
- Re-Test: Sometimes, prices re-test the neckline after the breakout. If the re-test holds as support, it can be a good entry point.
-Confirmation Candle:Look for a candlestick pattern that confirms the bullish momentum after the breakout, such as a bullish engulfing pattern.
5. Stop-Loss Placement:
Setting an appropriate stop-loss is a critical aspect of any trading strategy, and different traders might have varying approaches based on their risk tolerance and trading style. It's great to see you considering various stop-loss placement options. Let's discuss the merits of each of the options you mentioned:
1. Set a Stop-Loss Below the Lowest Point of the Double Bottom Pattern:
- Advantage: This approach is based on the premise that the lowest point of the pattern is a significant support level. If the price drops below this level, it could indicate that the pattern is no longer valid.
-Consideration: Placing the stop below the lowest point provides a wider stop and potentially allows for more market fluctuations before triggering the stop.
2. Set a Stop at the Midpoint Height of the Double Bottom:
- Advantage: Placing the stop at the midpoint height offers a balanced approach and may help limit potential losses in case the price reverses.
- Consideration: The midpoint stop might be closer to the breakout point, which could increase the likelihood of being stopped out by short-term price fluctuations.
3.Set a Stop Below the Low of the Breakout Bar:
- Advantage: This approach offers a more proactive risk management technique. If the breakout bar's low is breached, it could indicate a potential failure of the pattern and prompt an exit.
- Consideration: Placing the stop below the breakout bar's low provides a tighter stop and may result in fewer losses if the pattern fails, but it might also increase the risk of being stopped out prematurely.
The option you prefer, placing the stop below the low of the breakout bar, aligns with a more proactive approach to risk management and minimizing potential losses. It's important to recognize that each option has its own trade-offs, and the choice ultimately depends on your risk tolerance, trading strategy, and the specific characteristics of the trade.
6. Price Target:
To determine potential price targets, measure the vertical distance from the lowest trough to the neckline and project that distance upward from the breakout point. Consider using Fibonacci extension levels or other technical levels as additional targets.
Here's how you can use this strategy to determine your price targets:
1. Target 1: 200% Fibonacci Extension (Acts as 100% from Its Height)
- Measure the distance between the lowest point of the double bottom pattern and the highest point between the two troughs.
- Extend this distance by 200% above the highest point to determine your first potential price target. This level effectively acts as a 100% extension from the pattern's height.
2. Target 2: 250% Fibonacci Extension (Acts as 150% from Its Height)
- Extend the pattern's height by 250% above the highest point to establish your second potential price target. This level corresponds to 150% of the pattern's height.
3. Target 3: 300% Fibonacci Extension (Acts as 200% from Its Height)
- Extend the pattern's height by 300% above the highest point to set your third potential price target. This level is equivalent to 200% of the pattern's height.
7. Risk Management:
Risk management is a fundamental aspect of successful trading that aims to protect your capital and minimize potential losses. Here are some key principles and strategies to consider when implementing effective risk management in your trading:
1. Position Sizing: Determine the appropriate size of your trades based on your account size and risk tolerance. Avoid overleveraging, as larger position sizes can lead to significant losses if the trade goes against you.
2. Risk-Reward Ratio: Calculate the risk-reward ratio before entering a trade. This ratio compares the potential reward (profit) to the potential risk (loss) of a trade. Aim for a favorable risk-reward ratio, such as 2:1, where the potential reward is at least twice the potential risk.
3. Stop-Loss Orders: Always use stop-loss orders to limit potential losses. Place your stop-loss at a level that makes sense within your trading strategy. Consider technical levels, volatility, and your risk tolerance when setting your stop-loss.
4. Diversification: Avoid concentrating your trades on a single asset or market. Diversify your portfolio to spread risk across different assets, industries, or markets. This reduces the impact of a single losing trade on your overall capital.
5. Avoid Emotional Trading: Keep your emotions in check and stick to your trading plan. Emotional decisions can lead to impulsive actions and losses. Base your decisions on analysis and strategy, not on fear or greed.
6. Use Trailing Stops: Trailing stops allow you to lock in profits as the price moves in your favor. As the price rises, the stop-loss level adjusts upwards, protecting your gains while giving the trade room to breathe.
7. Risk Percentage per Trade: Decide on a maximum percentage of your capital that you are willing to risk on a single trade. Many traders recommend risking no more than 1-2% of your total capital on any given trade.
8. Backtesting: Test your trading strategy on historical data to assess its performance and determine potential drawdowns and losses. This helps you refine your strategy before risking real capital.
9. Continuous Learning: Keep improving your trading skills and knowledge. Learn from both successful trades and losses. Adapt your strategy based on new insights and changing market conditions.
10. Emergency Plan: Have a clear plan in place for unexpected market events, extreme volatility, or technical issues that could impact your trades. Be prepared to react quickly and decisively if needed.
TCPLTP
📈 4 BULLISH PATTERNS YOU NEED TO KNOW📌How to easily identify these patterns?
🟢Cup and Handle Pattern
The cup and handle pattern is a bullish continuation pattern that typically occurs after a significant uptrend. It is characterized by a U-shaped "cup" followed by a smaller consolidation known as the "handle." The cup portion represents a temporary pause or correction in the price, forming a rounded bottom. This signifies that selling pressure has diminished, and buyers are stepping in. After the cup formation, the handle is formed as a slight downward drift in price, usually in the form of a small consolidation or a shallow retracement. The handle represents a final consolidation before the resumption of the bullish move. The handle should be relatively smaller in size and have a downward-sloping price action.
🟢Double Bottom
The double bottom pattern is a bullish reversal pattern that signifies a potential trend reversal from bearish to bullish. It consists of two consecutive lows that are approximately at the same level, forming a support level. The first low represents a selling climax or a period of intense selling pressure. After the first low, the price rebounds and retraces to form a temporary high, creating a potential resistance level. However, buyers step in again, pushing the price back up, resulting in a second low that matches or is very close to the level of the first low. This double bottom formation indicates a significant level of support where buying interest outweighs selling pressure.
🟢 Bullish Flag
The bullish flag pattern is a continuation pattern that occurs after a strong upward move in price. It is characterized by a brief period of consolidation, where the price forms a narrow and rectangular range, resembling a flagpole and a flag. The flag portion of the pattern is typically slanted in the opposite direction of the initial price move. The flagpole represents the initial strong upward move, indicating a surge in buying interest. Following the flagpole, the price enters a consolidation phase, represented by the flag. This consolidation allows the price to stabilize and absorb selling pressure. The flag pattern should have parallel trendlines that contain the price action.
🟢Inverse Head and Shoulders
The inverse head and shoulders pattern is a bullish reversal pattern that indicates a potential shift from a bearish to a bullish trend. It consists of three consecutive lows, with the middle low (the head) being lower than the two outer lows (the shoulders). The pattern resembles a head between two shoulders. The left shoulder forms as the price declines, followed by a subsequent rally to create a temporary high. The price then retraces, forming the head, which is lower than both the left and right shoulders. After the head, the price rallies again to form the right shoulder, which is usually slightly higher than the left shoulder.
👤 @QuantVue
📅 Daily Ideas about market update, psychology & indicators
❤️ If you appreciate our work, please like, comment and follow ❤️
📊 How to: The Double Bottom Pattern📍 What is the Double Bottom Pattern?
The double bottom pattern is a trend reversal pattern observed on charts, such as bar and Japanese candlestick charts. Similar to the double top pattern, it consists of two bottom levels near a support line called the neckline. The pattern indicates the end of a downtrend and is confirmed by two failed attempts to break the support level. As a bullish reversal pattern, it signifies a shift in momentum and is commonly used by traders to enter long buying positions.
📍 How to Identify
In general, it is fairly simple to identify a double bottom pattern on a trading chart. This pattern can be identified when the price retests the support line and rises up again above the neckline. As a tip, you can usually identify the pattern as a “W” letter formation.
💥 Key Takeaways
The double bottom pattern is a bearish momentum reversal resembling the letter W.
It requires three main elements: first low, second low, and a clear neckline to identify the formation.
The pattern is more effective at the end of a strong downtrend rather than in a ranging market.
Drawing a support level and a neckline is necessary to trade this pattern.
Confirming the pattern with other technical analysis tools like moving averages, RSI, Fibonacci retracement level, and MACD is important.
The recommended approach to trading the double bottom pattern is to wait for the price to break the neckline with a stop-loss order and assess the risk-reward ratio.
👤 @QuantVue
📅 Daily Ideas about market update, psychology & indicators
❤️ If you appreciate our work, please like, comment and follow ❤️
How To Trade Double Bottom Pattern?
✅In the world of forex trading, understanding patterns and trends can make all the difference between profit and loss. One popular pattern that traders often look out for is the double bottom, also known as the "W" pattern.
✅The double bottom pattern occurs when the price of a currency pair reaches a low point, bounces back up, dips again to the same level, and then bounces back up again, creating a "W" shape. Essentially, the market has twice failed to break through the support level, indicating a potential reversal to the upside.
✅This pattern is often seen as a bullish indicator, as it suggests that buyers are stepping in and pushing the price up. It is important to note, however, that the second bounce should not dip below the first one, as this could indicate a continuation of the bearish trend.
✅So, how can traders take advantage of the double bottom pattern? One strategy is to enter a long position once the price breaks out above the resistance level created by the two bounces. This breakout confirms the reversal and can signal a potential uptrend.
✅It is also important to combine the double bottom pattern with other technical indicators, such as the Relative Strength Index (RSI) or Moving Average Convergence Divergence (MACD), to confirm the potential reversal.
✅However, as with any trading pattern, it is important to approach the double bottom with caution and to always have a solid risk management strategy in place. Traders should also be aware of potential false signals and market noise that could obscure the true trend.
✅In summary, the double bottom pattern can be a useful tool for forex traders looking to identify potential reversals and enter profitable trades. By combining it with other technical indicators and practicing proper risk management, traders can improve their chances of success in the ever-changing and unpredictable world of forex trading.
I hope this post was helpful to some of our beginner traders😊
Dear followers, let me know, what topic interests you for new educational posts?
Double Top/Bottom Pattern #️⃣OKXIDEAS!!!👨🏫Hello, everyone!👋 (Reading time less than 7 minutes⏰) .
There are many opportunities in the market that traders can get at every single moment. Some like to step up little by little, and some like to climb the mountain as soon as possible. The financial market, such as crypto and forex, is the same. That’s why some patterns represent the consequence of being an overnight millionaire.
In this article, I will discuss two resembling patterns and talk about how to trade with them.
------------------------------------------------------------------------------------------------------------------------------------------------
Double Top Pattern:
Double Top Pattern is the name of a classic pattern that can bring lots of money for the ones who use it to trade in different financial markets, such as cryptocurrency and forex.
It’s noted that this pattern is used in two-sided markets, and stock traders cannot use Double Top Pattern to enter but to exit.
Double Top Pattern is one of the most common technical patterns that can be used to identify an asset's roof on the chart.
Stay with me to learn how this pattern is drawn on the chart and how you can get dollars out of it in very simple words.
As the name suggests, Double Top represents the highest point of an asset in the area, which is known as a sensitive resistance zone.
Reversal patterns are one of the most important chart patterns. So is Double Top, which occurs at the end of an upward trend. That means Double Top is a bearish reversal pattern.
As the name shows, this pattern forms from two consecutive rounding tops according to the standard.
Here you can see what the Double Top Pattern looks like:
In an uptrend, the price breaks through resistance levels one by one, as it rises.
When the price reaches a vital resistance level stronger than the last support level, that resistance pushes the price down, and it breaks through the support level.
Buyers know that the uptrend has ended, and the price will enter a bearish channel.
The shape of this pattern is like the letter ‘M,’ which has caused many traders to name it the ‘ M pattern ,’ but I call it ‘ Double Top ’ or ‘ Twin Top .’
Here are some tips you have to know to reduce the mistakes you’ll probably face on the path:
Double Top can be used in any time frame.
In Double Top Pattern, the peaks are not exactly the same size or at the same price. You are about to ignore any slight differences between them.
The distance from the neckline to the top should be 20 to 25%(often) of the size of the upward trend; otherwise, it’s not considered a reversal pattern.
As you see in the picture, the price goes up for a while when the buyers struggle to push it up, but it cannot pass the neckline, so it’s rejected. This neckline touch is called “the last kiss,” which is one of the best short-entry positions. I recommend that a trader considers pullbacks as confirmations.
But on the other hand, you’ll lose some profits because not all the time pullbacks are completed. So, stay with me to tell you how to trade using the Double Top Patten.
How to trade on Double Top Pattern
There are some general methods that you can trade on Double Top Pattern; here you go:
1. Breaking neckline
The first strategy to trade using the Double Top Pattern is to take a short position when the neckline is correctly broken.
2. The price retracement to the neckline (pullback/last kiss)
The second useful strategy is to wait for the price to pull back to the neckline and then open a short position. It’s noted that the neckline is now considered a resistance line.
3. Combination of the first and second methods
To enter the short position transaction using the double top pattern, you can use a combination of the first and second methods. You can divide the amount of volume that you want to enter into a short position into equal amounts or amounts that are consistent with your capital management. Your first entry point can be when the price breaks the neckline in a valid way (better a bearish marubozu candle) / the second entry point can be when the price pulls back to the neckline / there is even a third point, a little below the level the valley where pullback began to form.
You can use a combination of the entry points I mentioned to enter a short position.
Does The Double Top Pattern Fail?
To tell the truth, all patterns have the possibility to fail, and Double Top is no exception.
Indeed, it’s no big deal, dude. A trader always finds a way to make enough profits.
As I mentioned, the Double Top Pattern is a reversal. When the price goes above the top, the pattern fails and is unsuitable for trading.
In this case, a buy signal can be considered. When the price passes the Double Top and goes up, a neckline is formed at the top, the line that connects the two tops on the above chart.
The entry point is when the price returns to this upper neckline. The stop-loss will be below the last bottom, and the take-profit point will be as long as the distance from the upper neckline to the last bottom.
Here is a secret I’ll tell you. Usually, after the failure of these reversal patterns, the upward trend continues with more strength, and you can make profits faster.
As I said earlier, during an uptrend, the price reaches its resistance zone, but it’s unable to pass it. Here the uptrend stops and finally it starts to go down in the opposite direction.
Now the buyers are pushing the price up to retest the resistance level, which is a hard shield to cross, and sellers are the winners in pushing the price to go down for the second time. This movement makes a pattern called “Double Top.”
But the point is that the Double Top pattern can appear in four different types.
Bearish reversal Adam and Eve Patterns; in descending order of power and efficiency:
1st.Eve & Eve Double Top (EEDT)
2nd.Adam & Adam Double Top (AADT)
3rd.Adam & Eve Double Top (AEDT)
4th.Eve & Adam Double Top (EADT)
Eve & Eve Double Top (EEDT)
Let’s see what the Eve-Eve pattern looks like. As you can guess, Eve-Eve consists of two round peaks. That is, both tops are similar to the upside-down letter U.
Adam & Adam Double Top (AADT)
In this type of pattern, you can see mountain-like price tops. That means the tops are similar to the upside-down of the letter V. In this type, one or two candles hit the resistance level.
Adam & Eve Double Top (AEDT)
In the case of Adam-Eve, the tip of the first top is sharp, and the second top is round and wide, which has a shape like an upside-down U.
Eve & Adam Double Top (EADT)
In this status, the first top is round, and the second top is pointed. Eve-Adam Double Top Pattern is exactly the opposite of the Adam-Eve one.
------------------------------------------------------------------------------------------------------------------------------------------------
Double Bottom Pattern:
Reversal patterns are in the tops and bottoms. The Double Bottom Pattern is a bullish reversal pattern that forms at the end of a downtrend, and it looks like the letter “ W ” in English. So it’s a good place to get a long position.
Unlike the Double Top pattern, buyers take control of the market so that when the price hits the support zone, it is pushed up again.
This pattern is one the best patterns for stock market traders with daily and long-term trades.
Double Bottom can be used in any time frame.
In two-sided markets, after engulfing the neckline, the potency of buyers increases, and more buyers enter the market.
Trading volume increases after breaking the neckline, so the price gradient steepens.
Here you can see an image of the Double Bottom Pattern:
How to trade on Double Bottom Pattern
After the price breaks the neckline, entering a long position can be profitable. But the confirmation is really important to be seen. The bullish Marubozu candle is one useful candle for pattern confirmation. Dojis and short candles are not that strong to convince confirmation. So you are about to face a fake break which leads the price to fall more.
Follow the steps below to make profits:
Entry points are like a double-top pattern.
Stop-loss is below the bottom.
Take-profit point is the distance from the neckline to the bottom.
Failed Double Bottom Pattern
Never forget that the patterns can be failed in the market due to the news and fundamental source. A professional trader is always looking for a valid confirmation.
When the price falls below two bottoms, the pattern fails. But you can earn money with the failed pattern too.
When the price passes the bottoms and goes down, a neckline forms under the pattern. This line connects the two bottoms.
Here I go with the failed Double Bottom Pattern:
The entry point is when the price returns to the neckline.
The stop-loss will be above the last top.
The take-profit point will be the distance from the bottom neckline to the last top.
Here is a picture of what a Failed Double Bottom Pattern looks like.
Classical patterns are in different shapes that directly affect their performance. Various types of Double Bottom Patterns are made with the Adam and Eve patterns.
These types of Double Bottom patterns are as follows:(in descending order of power and efficiency)
1st. Eve & Eve Double Bottom (EEDB)
2nd. Adam & Eve Double Bottom (AEDB)
3rd. Eve & Adam Double Bottom (EADB)
4th. Adam & Adam Double Bottom (AADB)
------------------------------------------------------------------------------------------------------------------------------------------------
🔔 Conclusion
Reversal patterns such as Double Top/Bottom can be really profitable, but the essential thing is to follow your strategy and capital management. I also suggest that you follow these educational series posts to get all you need about trading.
Overview of Reversal Chart Pattern IndicatorHello Everyone,
In this video, we discussed briefly about
Different Reversal Chart Patterns
Zigzag and Patterns Ecosystem of Libraries and Indicators developed in Pinescropt
Recursive Reversal Chart Pattern Indicator
Adding the snapshot for reference
Link to the Indicator:
Search for Zigzag and Pattern Ecosystem libraries and indicators in my profile if you like the subject :)
Learn The Most Accurate Price Action Pattern
Hey traders, We must admit that it is phenomenally difficult to become a consistently profitable trader.
This journey requires years of practicing and training, constant losses, and nervous breakdowns.
If you are a struggling trader, if you are still looking for your way to succeed in this game, here is the formula that will help you to chase consistent profits.
💰Consistent profits = 📝Trading Strategy + 🤬Emotions + 📈Market Sentiment
Let's discuss each element separately.
📝Trading Strategy:
To be in profit in a long run requires an understanding of what do you actually trade.
You must have strict and objective entry conditions.
You must rely on the objective & verifiable rules for the execution of market analysis.
You must have a plan to follow.
A plan that is backtested and proved its efficiency.
🤬Emotions:
Even the best trading plan, the most accurate trading strategy can be easily beaten by emotions.
Emotional decisions such as revenge trading and early position close
can easily blow the account of any size in a blink of an eye.
The most disappointing thing to note right here is the fact that you can be taught how to execute technical analysis but you can not be taught to control your emotions.
Your main enemy here is yourself and being in a constant battle with your greed and fear it is very easy to go broke.
Only by being humble, disciplined and patient, you can successfully apply a trading strategy.
📈Market Sentiment:
Mastering your emotions and having studied a trading strategy, it looks like it is finally the time to make money.
However, occasionally the market tends to be irrational.
Being chaotic and unpredictable, sometimes the market neglects every technical and fundamental rule.
Crisis, euphoria: the reasons can be different.
The fact is that such things happen.
And it is your duty to learn to deal with unfavorable market conditions.
💰To become a consistently profitable trader, you must become the master of these three elements.
Only then the doors to freedom and independence will be opened to you.
Let me know, traders, what do you want to learn in the next educational post?
Basic liquidity concept Remember to always spot the liquidity, before you become the liquidity... whether you trade liquidity or not,it is one of the most important thing to consider when trading,price moves from one pocket of liquidity to another.
stay safe guys
#IamACE #acedidit #AcetheTrader
Learn The Most Accurate Price Action Pattern
Hey traders,
If you are learning price action trading, you definitely must know a double bottom pattern.
Double bottom is a reversal pattern.
It is applied to spot early market reversal clues and catch the initiation of a new bullish trend .
Preconditions for a double bottom:
1️⃣ The market must trade in a bearish trend .
2️⃣ After a formation of the last lower high, the price must set equal low.
3️⃣ The price must return back to the last lower high level.
✅Once these conditions are met the pattern is considered to be completed.
The formation of the pattern is considered to be a ⚠️WARNING sign.
Even though many traders buy the pattern once it is completed,
for me it is not enough.
❗️Remember that the price can easily start to consolidate and form a horizontal channel for example.
The trigger that we will look for is the breakout (candle close above) the last lower high level (based on a wick and its highest candle close) - the neckline.
Being broken to the upside, the market sets a new higher high.
It signifies a violation of a current bearish trend .
⬆️Attempting to catch an initiation of a bullish trend , we will buy the market with a buy limit order on a retest of a broken neckline.
❌Safest stop will lie below the lows of the pattern.
💰Your reward must be at least 1.5 of your risk.
Following these simple rules, you will be impressed by how accurate this pattern is!
Let me know, traders, what do you want to learn in the next educational post?
How To Spot A Reversal Like a Pro!Hello Traders,
Spotting a reversal is always a daunting task I know. That is I use a 2 Step Down Timeframe Method to spot a reversal in correct way. I have explained step by step so please watch in full to understand it clearly. Also do not forget to like the video and let me know in the comment section if you have nay questions.
QML pattern Quasimodo | SMART MONEY CONCEPTHello all. Today we will talk about the reversal pattern "Quasimodo" or QML. Schematically it looks like this:
The price moves in the trend, in POI the structure breaks and after that, the price can not update the previous HH and the downward movement continues (consider a schematic example).
In this example, after the breakdown of the structure, the price reverses to soften and remove internal liquidity, after which a reversal occurs. This is done in order to close a losing position at the expense of those who put their stop losses behind the maximum of the substructure.
There are many names for this pattern, such as three tap setup, but I'm more accustomed to calling it quasimodo. If you like, it's a reworked version of the "head and shoulders" pattern, but in this case you're focusing on the price action instead of the picture.
Criteria for QML formation
1. Use it in HTF POI
2. Watch HTF POI
3.Watch the price action.
4. Premium or Discount zone
To use the pattern effectively, you must analyze the chart of all TFs. And use the pattern as an entry model. For example, the daily TF is bearish. The price is in the premium zone, as well as on the H1 TF began an uptrend, a full of bullish trend in the lower TF, after which we see that the substructure (red) has changed from a rising to a descending. And thus, we expect a continuation of the downtrend.
Important
Don't use this pattern in terms of "drawing". They can draw anything on the chart. I recommend to look for POI in POI of higher TFs.
An additional factor could be substructure fluctuations before FWG or OB. You need to see how the price behaves after their update.
Where to put a stop loss
The first option is a stop-loss for a local FVG/OB
The second - above swing high of substrucutre
Third - above the HTF point of interest, if your RR allows it
EXAMPLE
After updating the all-time high, the daily structure was broken. Then price consolidated, it was worth waiting for the manipulation. It was possible to enter from HTF POI - aggressive entry, but it was possible to wait for confirmation on the LTF (as I do).
I'm expect bullish OF on 4H chart to HTF POI (2D ob)
This "entry into position" is shown as an example, so that you can form an understanding of how to act in this or that situation. In conclusion, the more factors you take into account in your analysis, the higher the probability of working out of the pattern. Also, it's up to you to choose what kind of stop loss you will use. There is no right and wrong, everything depends on your strategy and money management.
The position was opened after the second liquidity raid in the premium market. I hope it was helpful to you. Thank you for your attention
DOUBLE BOTTOMHello everyone!
It's time to repeat the most popular patterns in trading.
One of these patterns is a DOUBLE BOTTOM.
Forming
There are several factors that you should pay attention to.
First, a new minimum appears.
This breakthrough is accompanied by increased volumes.
Such volumes are fixed by the indicator at this point, because there were a lot of stop orders here and the market absorbed them.
After this breakdown, the price begins a correction.
Nowhere without correction.
The correction is usually made to the breakout level, which used to be support, and now is resistance.
Having reached the level, the price turns down again.
And here is an important point.
If this breakdown is strong, then the price should go to update the lows further.
In theory, you can open short positions in the rebound area in the hope of continuing the trend.
Then we see the formation of the second bottom.
One of the main factors that the price will not fall further is the declining volumes.
This is a divergence.
From this we understand that forces are shifting to the other side and the trend may change.
In addition, we see that the price could not gain a foothold below the first bottom, which tells us about the weakness of sellers.
results
A double bottom is often found on the chart and serves as a signal for closing short positions and possibly opening long positions.
With a proper understanding of this pattern, you can get a lot of profit from trading.
The main thing is not to forget to monitor volumes, divergence and candlesticks that indicate the strength or weakness of the trend.
Traders, if you liked this idea or if you have your own opinion about it, write in the comments. I will be glad 👩💻
The Doube Bottom Pattern - Bullish PatternThe **Double Bottom** is a price action pattern that is indicative of a trend change once activated. Price needs to establish a bearish expansion towards the lows before reversing with an impulse. The impulse then needs to get sold into; this will create a retest of the previous low that must hold. Price action will establish a “W” structure which become a sign of demand that leads to a bullish expansion.
Key Characteristics of the **Double Bottom**
- Price Action must first establish a bearish expansion
- The retest of the previous low most hold
- A ‘W’ like formation will confirm demand at the lows
Forget about chart patterns! Hello, my dear friends and happy New Year!
I wish you to be healthy and reach all your goals in trading and not only! Never give up on this difficult way which we are going to overcome together!
Today we have a very important topic. How to use Elliott waves instead of classical chart patterns. This is the natural exposure why the chart patterns are garbage. I remember my third year at university when we have the trading lessons. Our teacher gave us a lot of useless knowledges about support, resistance and chart patterns. I have not understood why it should working and it was not soo intereting subject for me. That’s why I returned back to trading much later using self-education. Now I have the clear understanding why Elliott waves is the best tool and why it’s working. Most of traders even don’t understand that chart patterns is just the special case of Elliott waves. That’s why today I decided to explain you how you can change the first one to the second one. Let’s go!
Double Top(Bottom)
On the chart above I drew the different types of double tops. Generally we have 3 types of this pattern
Double top with the second top higher than the first one. In this case we can interpret it in two ways. It could be the classical waves 3, 4, 5 and the corrective wave A at the ending stage. In this case we can anticipate waves B and C. Also it could be the irregular correcton ABC inside wave 4 (rarely in wave 2). In this case we should wait for the wave 5 after that. Traders usually execute short position on the neckline breakdown and suffer when the wave 5 smashed their stop-loss. They are wondering why double top does not working.
Double top with the equal highs has the same possible outcomes. The only one difference that correction called flat instead of irregular.
Double top with the second top lower than the first one. Here is the most common variant is the end of the ABC correction. In this case we have the low potential for shorting the market becuase the new impulsive wave to the upside can hit all stop losses.
Head & Shoulders
This is the easiest pattern for analysis. The right sholder usually is the wave 4, the head, obviously is the wave 5 and the right shoulder is the wave B. On the neckline breakdown we have the shorting potential only in the rest part of the wave C. You could correctly count waves and short that the bearish reversal bar of the wave 5 or, as a last resort, at wave B potential top. Shorting at the neckline has sence only if you are sure that the wave B was the the wave 1 of the impulsive wave to the downside if higher degree and now the market is in wave 3. We have to learn how to count waves in a correct way. I would recommend you to read the Trading Chaos book by Bill Williams because it has the best explanation how do waves work.
Triangles and Wedges
This part is common for all types of triangles (ascending, descending, symmetrical) and wedges (falling and rising). This patterns have the similar structure. If we faced with one of these patterns we have 4 possible scenarios.
Triangle in the downtrend after the wave 3. In this case triangle is the wave 4, which is represented as the triangle correction. This correction type consists of 5 waves A, B, C, D and E. When the wave E is finished market will continue it’s move in the direction of a trend, printing the wave 5.
The same, but in the uptrend.
When the market showed us the 5 waves cycle to the upside and the correction is in progress. Triangle can appears in the wave B. In this case the price will continue the corrective move in the wave C after it’s finished.
The same with the downtrend.
Guys, of course there are much more types of chart patterns. For example, tripple tops and bottoms and so on. The purpose of this article is giving you another view of the market structure and to motivate you studying the Elliott waves theory. Believe me, it has much more potential than it seems on the first glimplse.
Best regards, Ivan
________________________________________________________________________________________________
If you like my educational ideas, please smash the boost button to stimulate me make more quality articles!
KOG - BASIC CHART PATTERNSThe plan was to do a series of posts on popular chart patterns as well as advanced chart patterns we use in Camelot. We did this earlier in the year so we're sharing it again, also as a reminder for us to continue with this in the new year as a series of educational posts to help traders in their day to day trading. There are many ways to trade patterns, structures, support and resistance levels, we're showing you how we do it.
Followers of KOG will know we are technical traders so we are always looking out for candlestick and chart patterns as part of our trading plans and analyses.
These are what we feel the 6 most common and basic chart patterns that you will find almost daily on the smaller time frames. During the course of this series we will look at each and everyone in more detail and give you live examples of how they work.
TIP: When trading chart patterns its always best to wait for the neckline of the pattern to break, this confirms the movement in the chosen direction. Chart patters also work best at key levels of support and resistance and at the top or bottom of trends. For example, if you see the price is at the top of the trend and a Head and Shoulders pattern is forming, this is the first sign of a reversal on price.
1) Always wait for the pattern to form and ensure its clear!
2) Wait for the break of the neckline
3) Breakouts usually occur with aggressive candles that are volume driven
4) Your first target should always be the nearest KEY support or resistance level, this ensures some profit is locked in and this is where you take a majority of the trade off the table, then leave a small runner for your target area
5) In most cases you will get a retest of the neckline, this is usually the best entry
Chart patterns are helpful in determining the direction of the instrument and most are reliable. When markets are ranging or we are in pre-event price action, for example before FOMC or NFP, you need to remain cautious when trading patterns. During these market environments you will likely see contradicting patterns as well as patterns inside patterns so know when to trade patterns and when not to!
Hope this helps traders.
As always, trade safe.
KOG
