Once a threshold number of up or down closes is reached , the strategy will trade in the direction of recent momentum (but as the exact opposite of pattern #3). So for long trades, “BCount” up closes coupled with positive momentum leads to a long trade. These will generally pop up on your charts when the market makes a strong, sudden move.

Past performance is not necessarily indicative of future results. Even when the market trended down at midday, they expected the breakout to the new low of the day to fail. This is because that’s what usually happens on trading range days. They bought the reversal up, betting that the rally would get back above the breakout point and back into the trading range. Sixty percent of the trades result in small wins and losses that usually balance each other out.

Winner takes all? Digital in the utility industry – McKinsey

Winner takes all? Digital in the utility industry.

Posted: Mon, 27 Mar 2023 00:00:00 GMT [source]

After the middle swing high, a lower high occurs which signals that buyers didn’t have enough strength to pull the price higher. You can also use the ADX indicator to identify the current market direction. However, bear in mind that the ADX is lagging the current price-action, just like other technical indicators. Most likely, you didn’t pay attention to the market structure when placing your trades. We’ll show you three simple steps to identify the current market structure and take a market direction with price-action trading techniques. A bullish continuation pattern that is used to show a period of bearish market sentiment before the overall trend finally continues in a bullish motion.

We have established that it is best to analyze day trading patterns on lower timeframes up to one hour. In addition, the article reviews in detail the technical analysis patterns that can be used for successful trading by closing trades during the day. It is recommended to use classic technical analysis indicators such as RSI, Stoch, or MACD in the chart in conjunction with price action analysis. This will help you identify patterns and potential trading opportunities. The double bottom pattern is the opposite of the double top pattern signaling the beginning of a new trend. As a rule, it occurs in the local base of the asset and tests the support level twice.

Renko Charts – A Whole New World of Price Action!

This facilitates trading, which is the reason why the market was created. First breakout above a tight bear channel is typically minor. The 2nd reversal has a 40% chance of being major, like here. Buy above a bull bar closing near its high .A reversal down from a breakout above a bull flag is often a higher high major trend reversal.


The engulfing term comes from the sudden price action consuming the previous candle’s range. Long wicked candles are an easy to spot feature from price action, and usually signal a pending reversal in the market. Don’t let them be your only factor in a trade decision, combo them with other high value technical areas on your chart, and bring it all together to build value into the trade idea. In short, it is a price action reversal signal, because it is possible to make forecasts of future price movement based off this rejection.

What do ‘pure’ or ‘naked’ price action mean?

Stop loss in this case should be set at the lower border of the trading channel. The picture below shows the formation of a resistance level and rising lows, after which there was an impulse breakout of quotes and price consolidation above the resistance. After retesting the level, there was an opportunity to open a buy position with the target at the height of the formed triangle. Stop loss in this case is placed below the broken resistance line at the distance of the low of the impulse candle. Inside bars typically offer good risk reward ratios because they often provide a tight stop loss placement and lead to a strong breakout as price breaks up or down from the pattern. Traders often wait for the price to move out of these areas during trends to help confirm trades.

Traders should look for emerging patterns where the range is sufficiently wide. Based on its name, it should come as no surprise that a descending triangle pattern is the exact opposite of the pattern we’ve just discussed. This triangle pattern offers traders a bearish signal, indicating that the price will continue to lower as the pattern completes itself. Again, two trendlines form the pattern, but in this case, the supporting bottom line is flat, while the top resistance line slopes downward. As a trader, it’s wise to be cautious about making trade entries before prices break above the resistance line because the pattern may fail to fully form or be violated by a move to the downside.

TRENDS, PATTERNS, AND VOLUME. Charts can be used to identify trends, patterns, volume, and so on. What if an asset class is so new to the market, there’s no common or standard method of analyzing its fundamentals? This is arguably the case with most cryptocurrencies, such as Bitcoin and Ethereum. With no standard fundamentals to guide you, technical analysis may be your most reliable tool for assessing valuations.

Best Tradingview Setup: How to setup TradingView for the PowerX strategy by Rockwell Trading

If the number of higher power patterns in price action is greater than the number of lower lows, and the current close is less than the close “pullback” bars ago, then go long at next open. Although this guide has been very long, I still was only able to skim the surface of price action trading knowledge. The Battle Station saves me a lot of time, and gives me the charts and time frames I should be looking at when something happens in the market. To make matters more extreme, using MT5 – which has more swing trading time frames that I like to monitor & trade . So, lets looks at the classic candlestick charts and some compare them against some of the other formats available. Once we establish our directional bias, we fall back to the technicals to highlight where a price action signal is likely to occur.


In this figure, there is a clear support level and a smooth decrease in highs. As a result, the lower price trend line is broken, and the price continues to rapidly decline by the height of the triangle. The cup and handle chart pattern is a continuation of an primary trend in the upward direction, however, it can also be a bearish trend reversal chat pattern.

Three Indians pattern: disassembling the 3-touch strategy

In this article, we tried to provide an introduction to pure price action trading and market structure analysis that generate high-probability trades in the market. The profitability of any trading technique depends on the experience and knowledge of the trader who utilises that technique. The information presented herein is prepared by and does not intend to constitute Investment Advice. Users/readers should not rely solely on the information presented herewith and should do their own research/analysis by also reading the actual underlying research. Past performance and forecasts are not reliable indicators of future results. As with candlestick patterns, you will have a much easier time remembering what these chart patterns mean if you understand the logic behind them.


Represented by a trend line caught between two upwardly slanted lines of support and resistance. In this case, the line of support is steeper than the resistance line. This pattern signals that an asset’s price will eventually decline more permanently – which is demonstrated when it breaks through the support level. The picture shows that the price was gradually decreasing after the prevailing trend in bullish direction, while the lows and highs of the price were declining. After the narrowing of the trading channel, there was an impulse breakdown of quotes upwards. After waiting for the re-testing of the broken resistance line, we could open a buy trade with the target higher by the level of the falling wedge height.

The price movements are calculated as the distance from the ‎neckline‎ level to the ‎head‎. The Fibonacci retracement is drawn on a chart from a low to a high , or a high to low . In a strong trend, pullbacks are typically shallow, often only reaching the 38.2% level. In most trends, pullbacks exceeding the 50% and 61.8% levels are common. If you enter a trade because a downtrend has started, stay in the trade until the trend reverses.

Continuation Patterns vs. Reversal Patterns

Looking at the two charts above, which one would you rather trade off of? Believe it or not, many trader’s charts look like the one on the right; full of messy indicators that they somehow think are going to give them high-probability entry signals. Simply put, trading is not technically complicated, and it’s not hard to learn to trade price action on a clean price chart like the one on the left.

It helps when you combine the large wicks with other technical features from your chart analysis to build a logical trade idea. That’s why “risk management” is a huge part of your trading education, to prevent big losses on our accounts when things don’t go expected. When your eyes first land on that chart – establish the type of market conditions you’re dealing with; is it a tradeable environment to begin with, or not? Don’t put money down into charts you can’t read and understand.


After a period of sideways trading, the market gaps upwards to reverse the bearish trend. The trading method is akin to the Double Top / Bottom chart pattern. A Double Bottom has two swing lows at around the same price level. Because it has very easy recognisation 1st have resistance than price should spend time their and then it will break than take entry.


If the volatility is high, you can use a larger stop loss for greater swings and you can shorten when the market calms down. Resistance zones can be great spots to target bearish reversal trades or to use with your exits. Bullish Engulfing Bar The bullish candle fully engulfs the previous candle. It can even engulf more than one candle, but to be a valid bullish engulfing bar, it must engulf at least one of the previous candles. For this entry you would be setting a trade entry and waiting for price to move higher or lower 50% in the opposite direction of where you actually want price to go for your trade.


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