Conventional thinking will tell us that higher lows, for instance, are bullish because they mean price was unable to break the previous low before going back up. Double tops are likely to be bearish because it means price was unable to break above the previous high and you could also look at it as price bouncing off of previous resistance, which is bearish.
Double bottoms are likely to be bullish because it means price was unable to go beneath the previous low and you could also look at it as price bouncing off of previous support, which is bullish. There are a few problems with this. Price starts going up and forms a high, and then it starts retracing.
You are going to wait for the HL and then go long, but there is a problem: If you can figure out when to enter because the HL can form at any point , you can make money as long as you get out before price goes against you. Be careful adding to winning trades because as soon as that retracement goes a bit too far, your winning trade can turn into a losing trade.
Here is a list of possible formations that can follow a HH:. Start with the vertical column and go across to see if a certain formation can follow it. Your email address will not be published. By April 28, - And a downtrend is just the opposite a series of lower lows and lower highs. As far as this kind of price action is concerned, those are all the possibilities you can have.
Now, is this enough off of which to build a trading system? Did you enter yet? Oh no, price formed a lower low! Now we should be looking for a lower high to confirm the downtrend, right?
A LL followed by a HH?! How does that happen?! People will come up with all sorts of rules, like: Here is a list of possible formations that can follow a HH: This is a very active topic and I will likely revisit it in the future. Leave a Reply Cancel reply Your email address will not be published. Follow Me On Twitter!More...