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Learn Price Models in Technical Analysis Part II

14-01-2018 | No Views : 897

Learn Price Models in Technical Analysis Part II

In the first part of the lesson on price models in the technical analysis, we dealt with some of the reflective price patterns, which are the most popular patterns, which can be relied upon in trading and predict future movement of price action.
In this lesson we will discuss other patterns, which help the dear reader in trading and enter deals of high quality, to raise the chances of success of the deal.

Reflective price models

Double Tops

The double-top model is an important and widely used price pattern in the technical analysis, due to the widespread appearance of the pattern on the chart in the financial markets, which reflects the low pressure of buyers on prices and the emergence of selling forces.
This causes the market to reverse often, after the pattern completes the fall below the neckline. Breaking the price of the neckline is a key requirement for the completion of the pattern. The model is easily drawn from the price chart because it represents two close peaks at the end The uptrend is as shown in the attached chart.

Configure the dual peaks model

  • The model should come at the end of a bullish trend and does not depend on it in the cross-section.
  • That the two peaks are at the same price level, and that the presence of the second summit at a lower level than the first summit does not spoil the model, but its presence at a higher price level spoils the model, as it is a sign of the return of control to buyers.
  • The pattern is completed with a lower price and a lower neckline.
  • The time of the model is also important, preferably the duration of the pattern is more than a month.
Double peaks
It should be noted that counting the fall below the neckline means that the pattern is not completed. It is preferable to enter with a re-test of the neckline rather than the break, where the probability of reversal is higher.

Target and stop losses for the double peaks price pattern

The objective of the Dual Tops model is to measure the distance between the neckline and the top to be the target of the descending movement of the leaders, preferably 70% of the target, since in many cases 100% of the target is not reached and the stop loss is the return of the price for trading above the neckline one more time. 

Dual bottoms model

The double bottoms pattern differs from the double top pattern in that it comes at the end of the descending market in the form of two identical floors at the same price level, and the same double top conditions apply.
Double bottoms

Target and stop losses for the double bottoms pattern

The target of the double bottoms is equal to the distance between the neckline and the bottom, and the stop loss is the return of the price down the neckline to signal the return of control to sellers on prices.
Dear reader, we have completed the second lesson in the series of lessons of price models in the technical analysis, and we have finished explaining the most popular price models in the technical analysis, which enables you to predict the times of reversal of the trend, to get the best result, and in the next lessons we will deal with price models continuity that enables you to Expect price action to continue in the same direction as it appears.

Price Models in Technical Analysis Part III Learn price models in technical analysis
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