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FALSE BREAKOUTS (MARKET DECEPTION)All Warfare Is Based Upon Deception: This was spoke by the 6th century Chinese general Sun Tzu. "All my rules in trading and the foundation of my trading plan itself is based off the book The Art Of War". So how do I apply this quote to the markets: The goal in trading is to accurately predict the future price of an asset and to profit off your predictions. Theres only 2 types of analysis, funcomentol and technical so there are 2 areas we can find market deception, one side deceiving another for financial gains. In fundamentals, market deception is found within companies and centrolbanks. In technical analysis It found in false breakouts and here's why: False breakouts happen when the market is in a consolidation or a range usually after a trending move ending at a support or esistance. It is a time of low volatility. after awhile of consolidation or ranging there will be a breakout and this breakout could be considered as ether a reversal or continuation of the overall trend. the deception is when price breaks out all the breakout traders are buying or selling into that direction. where's the logical stop loss level in this type of trade 9 times out of 10 above or below a previous high or low. unforchunatly the market makers and quants know that, so they slam price back the other way taking out all the stops in its path. (If you bought a breakout you're stop would be a sell order enough of these sell orders in one location once triggered would act like a push to a large boulder downhill.) In conclusion this is a deceptive move for market makers, Proprietary traders and quants, the so called smart money to add liquidity to the markets and of course make profits for themselves on the losses of others which is what trading is all about. NOTE: There's 2 types of false breaks, first being the above described based on deception which happens in a low volatility and the second are false breaks that happen in high volatility like in a very choppy market.The second I don't pay much mind to because I don't trade in choppy markets. The first, on the other hand is very important to watch for in low volatility at key support and resistance levels. being able to spot false breaks gives you the ability to utilise them and if caught in one and faked out of the trade, the understand of why gives you the ability to turn a disadvantage into an advantage.
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by stephenleachman
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OPENING RANGES An opening range is when the market opens at a particular time such as for the year, month, week and day or session in forex.The market sets a high, a low and reviets those highs and lows but fails to break through creating the range. I personally need to see price test a level at least twice making a type of double top, double bottom forming the range. opening ranges are the same concept as any other type of range, your ether playing inside the range or waiting for a breakout. once price breaks out it becomes a trading opportunity and even more opening ranges can set a direction bias of the market. The types of opening ranges: Daily Or Session in forex open range - Assets traded on an exchange, Look for price to set an OR in the beginning of trade on that exchange. Forex on the other hand watch for the open of the session to set a doble high, doble low and whait for the break. Remember in trading the session Opening range breakout only trade currencies correlated to that session. This is an intraday trade setup and can not be used for a longer term bias. Weekly opening range - In forex the weekly open begins on sunday at 5PM EST, From this time look for the market to set a double high, double low marking the range. Remember that time is not an issue, to set a weekly OR it could take 1 day or a couple of days the most important thing is that it set at least a double top & bottom befor the break. Once price breaks to one side and there's a pullback that's supported, the breakout direction can now also be used as a bias for that week. a lot of times there will be at least 2 impulse moves on a weekly OR break , an impulse move after the pullback consolidation and then another impulse move usually the second impulse move is towards the end of the week. monthly Opening range - I personally don't use monthly OR much but they can give a directional bias for that month. Yearly opening range - which can be used to provide an overall direction for the year. Usually the first couple of months within the year markets will make a large range trying to figure out where it should go Once that range breaks to one side it's a powerful signal that price will continue in that direction for a while. Remember this is a longer term time horizon so yearly OR breaks can lead into big moves. NOTES: I only trade the session and weekly Opening Range breakouts, the monthly and yearly OR breaks I only use for a longer term bias. Trading the OR Breakout is always best to go in the direction of the trend. Conventional Way To Trade The Bullish Opening Range Breakout: -----Breakout----- (1)Wait for a clear opening range to form. (2)Buy a break of the top of range. (3)Stop can be place below the range low or 50% retracement of bottom to top of range depending on risk - reward. (4)Target should be structure based at a key resistance level each setup will be different. -----PullBack----- (1)Wait for a clear opening range to form. (2)Buy a pullback at the breakout level. (3)Stop can be place below the range low or 50% retracement of bottom to top of range depending on risk - reward. (4)Target should be structure based at a key resistance level each setup will be different. Conventional Way To Trade The Bearish Opening Range Breakout: -----Breakout----- (1)Wait for a clear opening range to form. (2)Sell a break of the Bottom of range. (3)Stop can be place above the range high or 50% retracement of top to bottom of range depending on risk - reward. (4)Target should be structure based at a key support level each setup will be different. -----PullBack----- (1) Wait for a clear opening range to form. (2) Sell a pullback at the breakout level. (3) Stop can be place above the range high or 50% retracement of top to bottom of range depending on risk - reward. (4) Target should be structure based at a key support level each setup will be different.
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MARKET CONDITIONS - THE FUNDAMENTAL BASIS OF STRATEGYMarket condition are the foundation to every strategy. There are 2 primary market condition Trend and Range, ether the price is making new highs or lows (trending) or is stuck between a previously established high and low (ranging). Within these 2 types of market conditions comes sub conditions such as that the market can only move in 3 directions up (bull trend), down (bear trend) or sideways (range). The price movements are considered waves and within the 3 directions that the market is able to move can be extrapolated 4 wave types, which are as follows: Impulse wave - a strong bullish or bearish move usually making new highs or lows in a trend. Profit taking wave - this happens at the end of the impuls wave and can be a retracement - pullback or consolidation. Reversal wave - failure to make a new highor low which usually happens at the top or bottom of a trend and is a signal of a reversal or deep retracement of the overall trend. Range wave - this wave just bounces of a previously established high and low. They are mainly waves that just zig zag back and forth. Knowing the direction and wave types we can now see that there's only 4 logical areas within the market in which to build or use a pre configured strategy. These areas are as follows: Breakout. Swing, Pullback. Trend Reversals. Range. Remember, Build the strategy to fit the market you CAN NOT build the market to fit the strategy. That also goes for aplying the stratogy, to apply the propper stratogy for the typ of market condition. Also a key factor in market conditions is the speed and strength at which price moves. The slide above is an illustration of my way in understanding the markets speed and strength or momentum. The definition I give to volatile and volatility is Explosive, Rappied, it is the speed that the market changes price. Momentum is a directional compass to that volatility. So There are volatile trends where price is rapidly moving up or down providing very little retracements or pullbacks. There are normal trends where price is moving steady up or down providing deeper retracements, a nice steady trend. Then there are volatile Ranges they are the raped moving ranges that make many false breakouts. last there are quiet ranges, this is a tight slower moving range, a time of market equilibrium. Remember the market always will have to come back to a point of equilibrium. Identifying market conditions is the first step in my trading plan. Before I do anything else I take blank charts of the assets i'm looking to trade and look at the market conditions to see what is price doing then i'll look to apply a strategy tailored to fit that type of market condition.
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SYMMETRICAL TRIANGLE (TREND CONTINUATION)The symmetrical triangle is a trend continuation pattern. this pattern starts out with an impulse move followed by a period of consolidation. The consolidation forms lower highs and higher lows forming the sideways triangle. once price starts to squeezes together the momentum buildup usually shouts price back into the direction of the trend, The first Impulse move. Usually you can expect to see after a breakout price to move the distance of the mouth of the triangle. Conventional way to trade a bullish Symmetrical Triangle pattern: -----Breakout----- (1) Wait for a clear Symmetrical Triangle to form. (2) Buy a break of previous high. (3) Stop below the previous Low. (4) Target Is the Distance Between The Mouth Of The Triangle Added To The Breakout. -----PullBack----- (1) Wait for a clear Symmetrical Triangle to form. (2) Wait for price to break and close above previous high. (3) Buy pullback at point of triangle. (4) Stop below the previous Low. (5) Target Is the Distance Between The Mouth Of The Triangle Added To The Breakout. Conventional way to trade a Bearish Symmetrical Triangle pattern: -----Breakout----- (1) Wait for a clear Symmetrical triangle to form. (2) Sell when price breaks the previous low. (3) Stop Abouve the previous High. (4) Target Is the Distance Between The Mouth Of The Triangle Added To The Breakout. -----PullBack----- (1) Wait for a clear Symmetrical triangle to form. (2) Wait for price to break and close below previous low. (3) Sell pullback at point of triangle . (4) Stop Abouve the previous High. (5) Target Is the Distance Between The Mouth Of The Triangle Added To The Breakout.
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MORNING STAR - CANDLE FORMATION (BULLISH REVERSAL)Consists of 3 candlesticks. The first candle is a down candle. The second candle creates a newlow and is a relatively small Candle. This can be a doji or hammer type of pattern. The third candle is a strong bullish candle that reverses the first 2 candles. NOTE: This is only a valid formation when at a key level of support. TRIGGER: Buy on the open of the next candle after the morning star is formed. After the morning star is formed wait for the open of the next candle to Buy a retrace of the morning star.
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PIERCING LINE - CANDLE FORMATION (BULLISH REVERSAL)Consists of 2 candlesticks where the first candle is a down candle. Both candles should have fairly large bodies and small or non-existent shadows. The second candle is a bullish candle that closes above the midpoint of the first candle. NOTE: This is only a valid formation when at a key level of support and I like to see a new low on the second candle. TRIGGER: Like the dark cloud cover, I don't often use this formation for a trigger into a trade but rather for confirming a bullish reversal.
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BULLISH ENGULFING - CANDLE FORMATION (BULLISH REVERSAL)Consists of 2 candlesticks. The size of the first candle is not important. The second candle should be a large bullish candle that creates a new low yet closes higher than the first candle. NOTES: his is only a valid formation when at a key level of support. TRIGGER: Buy on the open of the next candle after the close of the Bullish Engulfing. After the close of the Bullish Engulfing Candle wait for the open of the next candle to Buy a retrace of the Bullish Engulfing.
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HAMMER - CANDLE FORMATION (BULLISH REVERSAL)The hammer is a bullish candle formation that forms at the bottom of a downtrend. It begins with strong selling at the open but ends up closing near the open. It suggests price action may rise in the near future. NOTE: This is only a valid formation when at a key level of support. The longer the wick to the downside the stronger the reversal signal. The candle has to close above the open being a bullish candle. TRIGGER: Buy on the open of the next candle after the close of the hammer. After the close of the hammer wait for the open of the next candle to Buy a retrace of the hammer.
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DOJI - CANDLE FORMATION (TREND INDECISON, REVERSAL)The Doji is a candle formation whose opening and closing price are virtually the same. Visually, a Doji looks like a cross or plus + sign. It represents market indecision and suggests a potential for price reversal. NOTE: This is only a valid formation when formed at a key level of support or resistance. The longer the wicks the better and also the doji is more reliable when closed negative in a up trend (Bearish Reversal) and positive in a down trend. (Bullish Reversal) TRIGGER: Bearish reversal - Sell break of dojis bottom wick. Bullish reversal - Buy break of dojis top wick.
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EVENING STAR - CANDLE FORMATION (BEARISH REVERSAL)Consists of 3 candlesticks. The first candle is an up candle. The second candle creates a new high and is a relatively small candle. This can be a doji or hammer type of pattern. The third candle is a strong bearish candle that reverses the first two candles. NOTE: This is only a valid formation when at a key level of resistance. TRIGGER: Sell on the open of the next candle after the close of the third candle forming the evening star. Sell a retracement of the third candle of the evening star.
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DARK CLOUD COVER - CANDLE FORMATION (BEARISH REVERSAL)Consists of 2 candlesticks where the first candle is an up candle. Both candles should have fairly large bodies and small or nonexistent shadows. The second candle is a bearish candle that closes below the midpoint of the first candle. NOTE: This is only a valid formation when at a key level of resistance. TRIGGER: I don't often use this formation for a trigger into a trade but rather for confirming a bearish reversal.
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BEARISH ENGULFING - CANDLE FORMATION (BEARISH REVERSAL)Consists of 2 candlesticks. The size of the first one is not important. The second one should be a large bearish candle the creates a new high yet closes lower than the first candle. NOTE: This is only a valid formation when at a key level of resistance. TRIGGER: Sell on the open of the next candle after the close of the Bearish Engulfing candle. After the close of the Bearish Engulfing wait for the open of the next candle to sell a retracement of the Engulfing candle.
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HANGING MAN - CANDLE FORMATION (BEARISH REVERSAL)The hanging man is a bearish candle formation that forms at the top of an uptrend. It begins with a strong sell off at the open but ends up closing near the open. It suggests price action may decline in the near future. NOTE: This is only a valid formation when at a key level of resistance. The hanging man can be both a positive or negative candle it just needs to close near the open with little to no wick. TRIGGER: I don't often use this formation for a trigger into a trade but rather for confirming a bearish reversal.
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SHOOTING STAR - CANDLE FORMATION (BEARISH REVERSAL)The shooting star is a candle formation that closes below the open and has an upper body wick at least twice as large as the body. It is a bearish reversal pattern and suggests price action may decline in the near future. NOTE: The higher the wick and the lower the close with little to no lower wick the better and more powerful the reversal. In order to take advantage of this candle formation is must happen at resistance. TRIGGER: Sell on the open of the next candle after the close of the shooting star. After the close of the shooting star wait for the open of the next candle to sell a retrace of the shooting star.
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1-2-3 REVERSAL PATTERN (TREND REVERSAL)The 1-2-3 Reversal occurs very frequently and has a very high success ratio. This pattern occur at the end of trends and swings and they are an indication of a change in trend. They can also be found within a trading range and within other patterns as well. They take place when the directional momentum of a trend is diminishing. Price Pushes into a high or low (point 1) retrace making swing high or low (point 2) Price would then form another swing high or low (point 3). Perforable I must see point 3 Retrace at least to the 38.2 but not surpass the 61.8 Fibonacci retracement of point 1 to 2. Once price breaks the high or low of point 2 the reversol is confirmed and target is a 100% extension point 1 and 2. Conventional Way To Trade The 1-2-3 Reversal: -----1-2-3 Pattern Bearish Reversal----- (1) Wait for A deep retracement in a up trend point 1. (2) Wait for price to reverse going back into direction of trend point 2. (3) Wait for point 3 to retract at lease to the 38.2 but not surpass the 61.8 Fibonacci retracement of point 1 to 2 (3) Sell a break of point 2 swing low. (4) Stop Above Point 3. (5) Target is a 100% Extension of point 1 & 2. -----1-2-3 Pattern Bullish Reversal----- (1) Wait for A deep retracement in a down trend point 1. (2) Wait for price to reverse going back into direction of trend point 2. (3) Wait for point 3 to retract at lease to the 38.2 but not surpass the 61.8 Fibonacci retracement of point 1 to 2 (3) Buy a break of point 2 swing high. (4) Stop below Point 3. (5) Target is a 100% Extension of point 1 & 2. NOTE: Remember this pattern can be found everywhere, swings, at the end of trends, ranges and within other patterns Trade this pattern as the market presents it and use the right risk - reward
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HEAD & sHOULDERS (TREND REVERSAL)The head and shoulders are trend reversal patterns. They form at the end of a trend and makes a kind of triple top or bottme but only with the middle pick reaching into a higher high or a lower low and the lift and right picks being equal thus making a sort of head with 2 shoulders. After this pattern is clear you would wait until price breaks the neckline for confirmation of the reversal. Once confirmed Target Is the Distance Between The Top Of Head To Neckline Added To The Breakout. Note: I personally always trade pullbacks with this pattern never breakouts although I do have a favorite way of trading this pattern from the right shoulder witch I will attach here at a latter date. Conventional Way To Trade The Head & Shoulders Bearish Reversal: -----Head & Shoulders Bearish Reversal----- (1) Wait for a clear Head & Shoulders to form. (2) Wait for price to break and close below neck . (3) Sell pullback at neckline. (4) Stop Above Right Shoulder (5) Target Is the Distance Between The Top Of Head To Neckline Added To The Breakout. Conventional Way To Trade The Reversed Head & Shoulders Bullish Reversal: -----Reversed Head & Shoulders Bullish Reversal----- (1) Wait for a clear Reversed Head & Shoulders to form. (2) Wait for price to break and close Above neck. (3) Buy pullback at neckline. (4) Stop Below Right Shoulder (5) Target Is the Distance Between The Top Of Head To Neckline Added To The Breakout.
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TRIPLE TOPS & BOTTOMS (TREND REVERSAL)Triple tops and bottoms are trend reversal patterns. They start with a trend that pushes into resistance or support and pulls back then make another attempt at the high or low but fails to break it (At this point forming a double top or bottom) Price again, for the third time pushed to the high or low and was resisted or supported forming the triple top or bottom. Note that there's not always a double touch at the neckline with this patterns Rather look for the lowest swing low in a triple top or the highest swing high in a triple bottom to use as the neckline. once price breaks that swing low or high then this pattern is confirmed as a reversal. Targets after a break is measured by the the top or bottom to the neckline added to the breakout. I Personally don't play breakouts, I always need to see price pullback and that pullback be support or resisted before trading this pattern. Conventional Way To Trade The Triple Top & Bottom Reversal: -----Triple Top Bearish Reversal----- (1) Wait for a clear Triple Top to form. (2) Wait for price to break and close below neck - lowest swing low. (3) Sell pullback at neckline. (4) Stop above the 50% retracement of top to neck. (this gives a 1-2 risk reward) (5) Target Is the Distance Between The top to neck Added To The Breakout. -----Triple Bottom Bullish Reversal----- (1) Wait for a clear Triple Bottom to form. (2) Wait for price to break and close Above neck - Highest swing high. (3) Buy pullback at neckline. (4) Stop below the 50% retracement of neck to bottom. (this gives a 1-2 risk reward) (5) Target Is the Distance Between The top to neck Added To The Breakout.
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WEDGE PATTERN ( TREND REVERSAL)Wedges are both trend reversal and continuation patterns. One can define the different by knowing that a rising wedge in a up trend is a sign of a reversal whereas a rising wedge in a downtrend is considered as a type of retracementand you want to be looking to trade back into the direction of the trend (see attachment) This is also the same for descending wedges. a descending wedge in a downtrend is the reversal sign and in a up trend is a retracement. The reversal wedge patterns are signs of a trend losing strength. The pattern pushes into a new highs or lows but with momentum slowing forming the wedge pattern. once price breaks the wedge and prior high or low confirming the reversol, I preferably always wait for a pullback to the breakout of a fib level trading this pattern. Target is the Distance Between The Mouth of the wedge Added To The Breakout. Conventional Way To Terad The Wedge Reversal: -----Ascending Wedge Bearish Reversal----- (1) Wait for a clear Ascending Wedge to form. (2) Wait for price to break and close below previous low - swing low. (3) Sell pullback at breakout level. (4) Stop above the 50% retracement of top of wedge to breakout. (Can also Use Wedge High) (5) Target Is the Distance Between The Mouth of the wedge Added To The Breakout. -----Descending Wedge Bullish Reversal----- (1) Wait for a clear Descending Wedge to form. (2) Wait for price to break and close Above previous high. (3) Buy pullback at Breakout. (4) Stop below the 50% retracement of breakout to bottom of wedge. (Can also Use Wedge Low) (5) Target Is the Distance Between The Mouth of the wedge Added To The Breakout.
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DOUBLE TOPS & BOTTOMS (TREND REVERSAL)Double tops and bottoms are trend reversal patterns they start with a trend that pushes into resistance or support then retraces After price retraces then the opposite party comes in and attempts to push price back into the direction of the overall trend but with no success in breaking the previous high or low. The double top is a bearish reversal pattern and the double bottom is a bullish reversal pattern.Once price breaks the neckline set by the swing high or low you could anticipate a measured move from the top or bottom to the neckline added to the breakout. Conventional Way To Terad The Double Top Bearish Reversal: -----Breakout----- (1) Wait for a clear Double Top to form. (2) Sell a break of the neck swing low. (3) Stop above the 50% retracement of top to neck. (this gives a 1-2 risk reward) (4) Target Is the Distance Between The top to neck Added To The Breakout. -----PullBack----- (1) Wait for a clear Double Top to form. (2) Wait for price to break and close below neck - swing low. (3) Sell pullback at neckline. (4) Stop above the 50% retracement of top to neck. (this gives a 1-2 risk reward) (5) Target Is the Distance Between The top to neck Added To The Breakout. Conventional Way To Terad The Double Bottom Bullish Reversal: -----Breakout----- (1) Wait for a clear Double Bottom to form. (2) Buy a break of the neck swing High. (3) Stop below the 50% retracement of neck to bottom. (this gives a 1-2 risk reward) (4) Target Is the Distance Between The bottom to neck Added To The Breakout. -----PullBack----- (1) Wait for a clear Double Bottom to form. (2) Wait for price to break and close Above neck - swing high. (3) Buy pullback at neckline. (4) Stop below the 50% retracement of neck to bottom. (this gives a 1-2 risk reward) (5) Target Is the Distance Between The top to neck Added To The Breakout.
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SYMMETRICAL TRIANGLE (TREND REVERSAL)The symmetrical triangle as in all triangle patterns can be used as trend reversals. It must be noted that the symmetrical triangle must form at a key level of support or resistance.This pattern forms as price pushes into support or resistance and then consolidates making lower highs and higner lows forming the symmetrical triangle, Once price breaks the triangle conforming the reversal, I personally always wait for a pullback to the previous highs or lows to see if price will be resisted or supported before taking a reversol trade. There are different methods Like Fibonacci Retracements to find targets after a confirmed reversol but I will lay out the conventional way which is the Distance Between The Mouth Of The Triangle Added To The Breakout. Conventional Way To Terad The Symmetrical Triangle Reversal: -----Bearish Reversal----- (1) Wait for price to push into key resistance. (2) Wait for price to consolidate at that resistance forming a symmetrical triangle. (3) Wait for price to break and close below prior low. (4) Sell pullback at prior low. (Sometimes the pullback stretches to the point of triangle) (5) Stop Above the previous Highs. (6) Target Is the Distance Between The Mouth Of The Triangle Added To The Breakout. -----Bullish Reversal----- (1) Wait for price to push into key support. (2) Wait for price to consolidate at that support forming an Symmetrical triangle. (3) Wait for price to break prior highs. (4) Buy pullback at prior highs. (Sometimes the pullback stretches to the point of triangle) (5) Stop Below the previous Lows. (6) Target Is the Distance Between The Mouth Of The Triangle Added To The Breakout.
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DESCENDING TRIANGLE (TREND REVERSAL)The descending triangle as in all triangle patterns can be used as trend reversals. It must be noted that the descending triangle must form at a key level of support or resistance.This pattern forms as price pushes into support or resistance and then consolidates making lower highs and equal lows forming the descending triangle, Once price breaks the pattern conforming the reversal, I personally always wait for a pullback to the previous highs or lows to see if price will be resisted or supported before taking a reversol trade. There are different methods Like Fibonacci Retracements to find targets after a confirmed reversol but I will lay out the conventional way which is the Distance Between The Mouth Of The Triangle Added To The Breakout. Conventional Way To Terad The Descending Triangle Reversal: -----Bearish Reversal----- (1) Wait for price to push into key resistance. (2) Wait for price to consolidate at that resistance forming an descending triangle. (3) Wait for price to break and close below prior low. (The Triangles Lows) (4) Sell pullback at prior low. (5) Stop Above the previous Highs. (Also can use fibonacci retracements for stops) (6) Target Is the Distance Between The Mouth Of The Triangle Added To The Breakout. -----Bullish Reversal----- (1) Wait for price to push into key support. (2) Wait for price to consolidate at that support forming an descending triangle. (3) Wait for price to break prior highs. (4) Buy pullback at prior highs. (5) Stop Below the previous Lows. (Also can use fibonacci retracements for stops) (6) Target Is the Distance Between The Mouth Of The Triangle Added To The Breakout.
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ASCENDING TRIANGLE (TREND REVERSAL)The ascending triangle as in all triangle patterns can be used as trend reversals. It must be noted that the ascending triangle must form at a key level of support or resistance, I like to use double tops or bottoms. This pattern forms as price pushes into support or resistance and then consolidates making equal highs and higher lows forming the ascending triangle, Once price breaks the pattern conforming the reversal, I personally always wait for a pullback to the previous highs or lows to see if price will be resisted or supported before taking a reversol trade. There are different methods Like Fibonacci Retracements to find targets after a confirmed reversol but I will lay out the conventional way which is the Distance Between The Mouth Of The Triangle Added To The Breakout. Conventional Way To Terad The Ascending Triangle Reversal: -----Bearish Reversal----- (1) Wait for price to push into key resistance. (2) Wait for price to consolidate at that resistance forming an ascending triangle. (3) Wait for price to break prior low. (4) Sell pullback at prior low. (5) Stop Above the previous Highs. (The Triangles Highs) (Also can use fibonacci retracements for stops) (6) Target Is the Distance Between The Mouth Of The Triangle Added To The Breakout. -----Bullish Reversal----- (1) Wait for price to push into key support. (2) Wait for price to consolidate at that support forming an ascending triangle. (3) Wait for price to break prior highs. (4) Buy pullback at prior highs. (Flat top of triangle) (5) Stop Above the previous Low. (Also can use fibonacci retracements for stops) (6) Target Is the Distance Between The Mouth Of The Triangle Added To The Breakout.
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WEDGE PATTERN (TREND CONTINUATION) The wedge pattern is both a trend continuation and a reversal pattern, here I will only talk about trend continuation. The wedge start with an impulse move followed by consolidation and a retracement. the consolidation and retracement squeezes price together forming a wedge. In a up trend the wedge will fall calling it a falling wedge and in a down trend the wedge will rise calling it a rising wedge. In any case ounce price breaks the wedge you could look for a 100% extension of the initial impulse move Conventional way to trade a bullish falling wedge pattern: -----Breakout----- (1) Wait for a clear falling wedge to form. (2) Buy a break of the previous high. (3) Stop below the previous Lows. (Low of wedge) (4) Target is a 100% extension of the first impulse move. -----PullBack----- (1) Wait for a clear falling wedge to form. (2) Wait for price to break and close above previous high. (3) Buy pullback at prior high. (4) Stop below the previous Lows. (Low of wedge) (5) Target is a 100% extension of the first impulse move. Conventional way to trade a Bearish Rising Wedge pattern: -----Breakout----- (1) Wait for a clear rising wedge to form. (2) Sell when price breaks the previous low. (3) Stop Abouve the previous High. (High Of Wedge) (4) Target is a 100% extension of the first impulse move. -----PullBack----- (1) Wait for a clear rising wedge to form. (2) Wait for price to break and close below previous low. (3) Sell pullback at the broken lows. (4) Stop Abouve previous High. (High Of Wedge) (5) Target is a 100% extension of the first impulse move.
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