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Chapter 14, Part II. Double top and Double bottom. Page 8

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 20, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

    Aug 28, 2009
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    Trading pattern’s failure

    And the last thing. Now let’s assume that market the has confirmed the pattern, but later returned back and has taken out the pattern’s extremes. In other words, the market has shown a Double Top failure. Don’t be upset with that. Very often a failed pattern is even stronger than a confirmed pattern, because they are based on public panic. When the public sits and cries before their computers and wonders what they are going to do now, you should act quickly. One way to do that, if failure has happened already, is to use a stop entry order that allows you to buy at the breakout of previous highs/bottoms of M/W-shape pattern. Such an entry will allow you to place a tight stop – behind some Fib support level that is just below the Tops, for instance. Another way – use the same strategy of anticipating possible failure as we did in anticipation of its confirmation. Say the market has confirmed a Double bottom, but then returned right back above the neck line. Take a look at the trend, patterns, how long he market stands above the neckline again and so on. If you see strong confirmation of a reverse move - then you may try to trade it. It will give you the same advantages as in our example of anticipating of confirmation of a Double top.
    Pipruit: Commander, your material is amazing, but too sophisticated for me. I suppose I need some time to read it again and again, and pass through it a few times in a row.​
    Commander in Pips: Yes, I think so. But it will help you much in practice.

    What to do if you’ve locked in counter trend position?

    Commander in Pips: This is a last topic concerning Double Top/bottom trading. Let’s turn to double bottom pattern here. This is weekly chart of JPY/USD futures:

    Chart #5 | JPY/USD futures weekly. W-bottom pattern

    Assume that you didn’t recognize W-bottom and looked at it as just an AB-CD retracement in a long term bear trend. You see that 100% target of AB-CD makes an Agreement with 0.618 Fib resistance and you intend to enter short here. Also you see that this is a resistance area - the previous bottom has moved higher right from the 0.76 area and later the market still broke it down.
    Hamza Samiullah and fran alvarez like this.
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