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How To Trade & Profit From Pattern Failures
The best trade could be in the opposite direction when a classic price pattern doesn’t behave according to perfect rules outlined in popular books and web sites. In fact, well-known patterns such as the head and shoulders and bull flag have clearly defined levels that can trigger trade entry signals that are contrary to the direction in which they're naturally leaning. Alex Elder examined this phenomenon with his Hound of the Baskervilles signal in Trading for a Living when he highlighted a head and shoulders neckline that just wouldn’t break, encouraging observant traders to jump into long positions, rather than following the herd and selling short.
We're taught early in our trading careers to buy breakouts and sell breakdowns, but many contrarians attempt to pay the bills doing the exact opposite. Simply stated, they wait for a rally or selloff to fail and sell the breakout or buy the breakdown. Oppositional tactics don't end there because tacticians employing these against-the-grain methods take the concept one step further and buy when the failure fails. Let's back up and examine this inverted thinking one step at a time.
Most of us follow a common path -- we pile into stocks, futures or forex pairs or crypto when they break out above easily observed resistance, but modern algorithms have been programmed to anticipate exactly how human traders will react when a breakout fails to attract momentum and rolls over. Using this knowledge, they intervene and guide price action down to levels where breakout traders are trapped and execute rapid fire short sales to generate additional downside momentum that completes the failure swing.
Now, twist your brain and take this contrary reasoning to the next level. You’re victimized by this diabolical price action enough times that you learn from your experience and sit on your hands when a favorite play breaks out. The rally stalls and it sells off but you still wait, watch and do nothing. Then, once selling pressure has dissipated and it closes back above the breakout level, you jump in and buy, knowing that weak-handed players are no longer positioned. Make sense?
Let’s deconstruct what just happened. The original breakout attracts the typical momentum crowd, chasing the stock, futures contract or forex pair to higher ground without too much thought or strategy. The upside fizzles out and price turns lower, trapping those who haven’t protected positions with stops or profit-taking strategies. Fear takes hold when the decline cuts through the level that first signaled the breakout, forcing additional downside that sets off more bearish signals. The falling instrument eventually finds its footing and bounces in a fresh assault that penetrates the broken level. New buy signals go off, drawing our contrarian into a long position.
How do algorithms know where human traders will act emotionally? Simply stated, most of us take market exposure utilizing common strategies that have been deconstructed by smart money and their software code. As a result, stock, futures and forex & Crypto prices seem to pass through support and resistance levels more easily now than in the past. Fortunately, when modern markets find new ways to take your money, they also provide new ways to make it.
Thats Why we code らƐЛらƐɪ Indicator !!
The best trade could be in the opposite direction when a classic price pattern doesn’t behave according to perfect rules outlined in popular books and web sites. In fact, well-known patterns such as the head and shoulders and bull flag have clearly defined levels that can trigger trade entry signals that are contrary to the direction in which they're naturally leaning. Alex Elder examined this phenomenon with his Hound of the Baskervilles signal in Trading for a Living when he highlighted a head and shoulders neckline that just wouldn’t break, encouraging observant traders to jump into long positions, rather than following the herd and selling short.
We're taught early in our trading careers to buy breakouts and sell breakdowns, but many contrarians attempt to pay the bills doing the exact opposite. Simply stated, they wait for a rally or selloff to fail and sell the breakout or buy the breakdown. Oppositional tactics don't end there because tacticians employing these against-the-grain methods take the concept one step further and buy when the failure fails. Let's back up and examine this inverted thinking one step at a time.
Most of us follow a common path -- we pile into stocks, futures or forex pairs or crypto when they break out above easily observed resistance, but modern algorithms have been programmed to anticipate exactly how human traders will react when a breakout fails to attract momentum and rolls over. Using this knowledge, they intervene and guide price action down to levels where breakout traders are trapped and execute rapid fire short sales to generate additional downside momentum that completes the failure swing.
Now, twist your brain and take this contrary reasoning to the next level. You’re victimized by this diabolical price action enough times that you learn from your experience and sit on your hands when a favorite play breaks out. The rally stalls and it sells off but you still wait, watch and do nothing. Then, once selling pressure has dissipated and it closes back above the breakout level, you jump in and buy, knowing that weak-handed players are no longer positioned. Make sense?
Let’s deconstruct what just happened. The original breakout attracts the typical momentum crowd, chasing the stock, futures contract or forex pair to higher ground without too much thought or strategy. The upside fizzles out and price turns lower, trapping those who haven’t protected positions with stops or profit-taking strategies. Fear takes hold when the decline cuts through the level that first signaled the breakout, forcing additional downside that sets off more bearish signals. The falling instrument eventually finds its footing and bounces in a fresh assault that penetrates the broken level. New buy signals go off, drawing our contrarian into a long position.
How do algorithms know where human traders will act emotionally? Simply stated, most of us take market exposure utilizing common strategies that have been deconstructed by smart money and their software code. As a result, stock, futures and forex & Crypto prices seem to pass through support and resistance levels more easily now than in the past. Fortunately, when modern markets find new ways to take your money, they also provide new ways to make it.
Thats Why we code らƐЛらƐɪ Indicator !!
Notes de version:
Swings update
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swing updates
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Update double box
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Some Extra confirmations xD for new level of Trading xD never miss a Bart Again xD
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Clean up and Conditions Done
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Equilibrium line add
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Alerts
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ATR Trend
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update
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Fixing spell
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more fixing
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done
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New Release
Large time frame box
Meridian Range Trend line
New Buy model sell model Large time frame
Buy model sell model Trend line
Large time frame box
Meridian Range Trend line
New Buy model sell model Large time frame
Buy model sell model Trend line
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Enjoy