Why You Should Avoid Trading Standard Patterns: Deeper AnalysisTrading based on technical analysis is a popular way for traders to identify market opportunities. One of the most common methods of technical analysis is the use of chart patterns. These patterns are recognizable formations created by price movements on a chart.
Traders use these patterns to identify potential areas of support and resistance, as well as trend reversals. However, there are several reasons why you should avoid trading standard patterns:
1. Widespread Awareness and Anticipation:
Standard patterns are well-known and widely anticipated by market participants. This means that they are already priced in, making trading them a low-probability strategy.
2. Potential for False Signals:
The formation of a pattern on a chart does not guarantee the expected outcome. In fact, standard patterns can often lead to false breakouts and failed trades.
3. Difficulty in Trading Effectively:
Trading standard patterns effectively requires a high level of skill and experience. Without a deep understanding of market structure and price behavior, traders can easily fall victim to false signals and whipsaws.
Advantages of Trading Liquidity Patterns:
Liquidity patterns offer a more effective and reliable alternative to standard patterns. These patterns are based on the concept of market liquidity, which refers to the ease with which an asset can be bought or sold without impacting its price. By identifying areas of high and low liquidity, traders can gain an edge in the market.
In-depth Analysis of Popular Patterns:
1. Double Bottom:
The classic double bottom pattern is a bullish reversal pattern that forms when the price of an asset makes two consecutive lows at the same level, followed by a rally.
However, the standard double bottom pattern has a significant drawback: it leaves liquidity below the lows, which can lead to false breakouts and failed trades.
A more effective way to trade this pattern is to look for a lower low. This occurs when the price makes a new low below the previous two lows. This indicates that the market is absorbing all the sell liquidity and is ready to move higher.
2. Triangle:
A triangle is a consolidation pattern that forms when the price of an asset ranges between two converging trendlines.
Traders often look for breakout trades in triangles, but this can be risky.
False breakouts are a common occurrence in triangle patterns.
This is because market makers often manipulate the price to induce traders to break out of the pattern, only to reverse the price and trap them in losing trades.
A more effective way to trade triangles is to look for liquidity grabs. This occurs when the price moves outside of the triangle, only to quickly return back inside. This indicates that market makers are taking liquidity from the market and are preparing to move the price in the opposite direction.
Practical Tips for Trading Liquidity Patterns:
Always trade with the trend. Liquidity patterns are most effective when they are traded in the direction of the overall trend.
Use stop-loss orders to protect your downside. This will help to limit your losses if the trade does not go your way.
Be patient and wait for the right setup. Don't force trades and only take those that meet your criteria.
Additional Considerations:
Market context: It is important to consider the overall market context when trading liquidity patterns. For example, patterns are more likely to be successful in trending markets than in range-bound markets.
Risk management : Always use sound risk management principles when trading, regardless of the pattern you are using. This includes using stop-loss orders and position sizing appropriately.
False signals: It is important to be aware of the potential for false signals when trading liquidity patterns. Not all patterns will lead to successful trades, and it is important to be prepared for losses.
Double Top
AUD/CAD Double Top Reversal Pattern Analysis: 📉📈
Greetings, traders! Let's delve into the analysis of the AUD/CAD daily chart, which is showcasing a compelling trading opportunity:
Pattern Identified: 📊
Double Top Reversal Pattern.
Current Price Position: 📈📉
The price has broken below the Neckline at 0.88775.
Trading Plan: 📉📈
Neckline Breakout:
The breakout below the Neckline at 0.88775 suggests a potential bearish reversal.
Targets: 🎯
Target the 100% retracement level at 0.86900 for a potential downside objective.
Risk Management: ⚖️🛡️
Implement a sound risk management strategy, including the use of stop-loss orders to mitigate potential losses.
Best of luck with your trading decisions! 🚀📊
US500Is US500 exhausting at resistance zone?
As the price is been on high bull run but now it seems like price is lacking bullish momentum after printing double top pattern at resistance level and bearish divergence( on lower time frame) suggesting the sell pressure is about to start.
If the bears took control , the 1st target could be 4840.
What you guys think of it?
/ES: End of Week Double Top Could Result In Secondary SelloffThe S&P 500 E-mini Futures appear to be double topping at around 4,835 as the end of the trading week approaches, this could result in an end of week selloff that continues into next week. The range in which it could sell off to on an intraweek basis is pretty wide. I would generally target the 800 EMA at around $4,678
CARDANO|Price return from important resistance areaCardano failed to break the last high, and the resistance zone did its job well, preventing the price from growing further.
With the return of the price, we see the formation of a double-top pattern. If the selling pressure is to the extent that it breaks the support area downwards and confirms the price pattern, we expect the price to experience the price area of 0.4425 and then the price of 0.3877.
AUD/CHF ↘️ Short Trade Setup ↘️Hello Everyone.
double top
💲 Entry Point : 0.56984
🟢 TP 0.56348 🔴 SL 0.57301
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Disclaimer
---------------
Trading is risky we all take loses
your responsibility is to not take more than 1% to 2% loss per trade and double your profits.
GBPAUD 4H Double topThe price of GBPAUD has formed a potential double top on the 4H Chart
Additional confluences:
- The pattern is happening at a strong reisstance range created from multiple previous low points in the price
- The 2 tops are showing rejection from the 0.618 Fib level
- The MACD has formed a bearish cross around the middle of the formation of the double top chart pattern
Trend Reversal 2024 - The First Week of the Year is Crucial The first week of 2024 the US market opened around the high and closed around the low. It is very similar in 2022 and 2023.
And what is the market telling us from the first week of 2024 and the direction for the rest of the year?
We are going match the fundamental reason with this technical observation over the last two years.
Also, what is the key fundamental we should be looking out for in 2024?
E-mini Nasdaq Futures & Options
Its Minimum Fluctuation
0.25 index points = $5.00
Code: NQ
Micro Nasdaq Futures & Options
Its Minimum Fluctuation
0.25 index points = $0.50
Code: MNQ
Disclaimer:
• What presented here is not a recommendation, please consult your licensed broker.
• Our mission is to create lateral thinking skills for every investor and trader, knowing when to take a calculated risk with market uncertainty and a bolder risk when opportunity arises.
CME Real-time Market Data help identify trading set-ups in real-time and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
Double top - PutsI bought a bunch of puts on this one. Market still on correction. Double top confirmed, testing the broken support and failing.
Update on the Yield Curve Inversion Battleplan Background
My first idea where I lay out a yield curve battle plan was published 13 months ago. It was by no means perfect but I found it quite useful. I used it to buy the dip the market was experiencing and then when I was not seeing the follow through to a new all-time high I went back into safer assets (except for my crypto play money). The last idea looked at the spread between the 10 and 2year US Government Bond and this one will be looking at the 30 and the two year. The spread on 30 versus 2 years isa lot more stable than the 10 and 30 and right now I find it is the more usefulmeasure.
Main Chart
The main assumption is that the process of the yield curve inverting is has extraordinarily complex ramification for the global financial system…. That are simply ultimately bearish. The complexity initially drives prices up and then when the curve reasserts prices are driven down. You could get lost in the weeds and look at the repo market, or how DXY pumping may affect trade balances and rotations int markets and all that. Which is fine.
But I am looking for something simpler. The most important thing to recognize is that the classic blowoff top and bull trap formation performed with a lot of fidelity to a ABC correction. A zoom in and view of the weekly chart shows a lot of strong buying right at the 2.618 level
The 1989 and 2006 inversion did not have clear topping structures like we see from the dotcom pop and the current double top (which putting in its lower high) Compared to the dotcom pop those were baby crashes in time and intensity. A zoom in on the current price action of NDX and the bond spread shows that we have had bearish reversal candles on NDX and growing green candles on the bond spread. It almost looks like the spread pair is in a W pattern and the ratio should be getting close to 2%-ish again.
Double Tops
Double tops have a take-off, a first high, a valley that links the first high to a second high, and then a sell off. Often the sell off returns price to the take off point. The tops do not need to be symmetrical. They can be “Eve and Adam” or “Eve and Eve” tops. Right now it isn’t clear that type of double top we are in. It could be a Eve and Adam or a Eve and Eve. Even more formally, until price returns to the neckline we don’t even have a confirmed double top and we are just in early pattern recognition. The whole process of a double top can take a long time.
Here is a bitcoin double top from last bear market on the 12-hour time frame. It took 60 days to return from the take off point. If I am right about being in the middle or beginning of the second top, then this pattern is only halfway or so to getting to target and over-performance is another matter.
Conclusion
If this idea is accurate once we see the 30- and 2-year US government Bond spread turn positive again we can expect a bear market/recession. We already had two quarters of GDP declining which for the longest time was a technical definition of a recession until “for some reason” people decided that wasn’t the definition anymore. Now also have numbers coming out of government agencies that people don’t trust because they don’t trust the Administratum and we are looking at chart formations and the yield curve for a real view of what is happening in the economy.
And it is pretty bearish.