I started adding patterns to my trading because they work!Johannes Röll 01 / March / 20 Visitors: 149
I started adding patterns to my trading because they work!
A pattern is a graphic figure, model, pattern, which is repeated on the chart as a result of the same behavior of the bulk of traders in the market. These figures help predict the price movement: the price will consolidate, move on or reverse. I want to acquaint you with the best ways to find a trend reversal, applicable both to an uptrend and to a downtrend.
1. The "Head and Shoulders" model.
With a strong uptrend, a HaS model is formed, two lateral peaks and an average, higher than the lateral ones. With bullish movement, a maximum forms, correction occurs, after which the maximum is updated, then the maximum decreases to the previous correctional depression and begins to form a third peak - the right shoulder. According to the rules of the model, the right shoulder cannot be larger than the previous maximum, that is, ideally above the left shoulder. The neckline is the level of support drawn along the hollows between the shoulders and the model is considered completed after the breakdown of the neckline.
What you need to know about this model:
1. A sell signal is a breakdown of support.
2. The second sell signal, a false breakdown and a sharp, small impulse from support to the north is the best point for entry.
3. The shoulders can be double.
4. Profit to the south is equal to the height from the head to the support.
5. The higher the time frame of the shape formation, the more reliable it is.
6. In practice, the right shoulder may be higher, wider, lower, or narrower.
The logic of the price movement is simple: the big player does not have enough lots to instantly refract the price, he goes into the sale three times, and the last right shoulder does not have enough volume to buy, it fails.
This model is also valid for a downtrend, but in this case it is inverted and has all of the above properties, exactly the opposite - an inverted "Head and Shoulders" model.
2. The Double Top model.
The formation of the model occurs in a bull trend and indicates the possibility of its reversal. It is two consecutive peaks, when the price forms a maximum, it is adjusted and with the next growth it can not break the previous maximum. A line through the peaks acts as resistance, and support is conducted through the trough. The figure is considered formed if the support was broken through the correction after the second maximum. All you need to know about the model:
1. A sell signal is a breakdown of support.
2. A false breakdown of support is possible with a sharp impulse from it - the best sell signal, since the price will go to a repeated breakdown.
3. Profit to the south is equal to the height of support from resistance.
4. The peaks can be wider, but not higher than each other.
The inverted Double Peak model - the Double Bottom or Double Bottom pattern, is used to find a reversal of a downtrend, has all of these properties exactly the opposite.
3. The triple top model.
The figure appears with a long uptrend. The model consists of three consecutive peaks through which resistance can be drawn to two troughs, the level of support. The model is considered to be formed upon breaking through the support of the depressions. You need to know about this model:
1. Not necessarily peaks and troughs will clearly go through the levels.
2. The peaks may differ, be narrow or wide in relation to each other.
3. A sell signal is a breakdown of the level of any of the depressions.
4. A false breakdown of support is possible, followed by a sharp jump from support to the north and a call to a second breakdown - the best sell signal.
5. The profit to the south is equal to the distance from the resistance level to the support level.
As in the mirror he looks at the above said model “Triple bottom” or “Triple cavity”. The model is formed in a bearish trend, when the price is not able to break a minimum three times. The model is considered to be formed during the breakdown of the resistance level (upward corrections).
Johannes Röll was born 1978 in Brilon,Germany. Graduated RWTH Aachen University. Over the past ten years he worked as Head of the plastic card team, where he was mainly responsible for the development of the distribution, Head of sales Department and Financial Analyst,where he got experience in planning and support sales figures for branches. For the present he works as freelancer