Let's continue one of the secondary themes from last weeks article:
"Trade against those who attempt to fight the market bias, aiming to enter at or before the point of their trade failure, to profit from their exit orderflow."
One way I love to see this set up is via a double failure pattern.
This can display in many ways, but essentially involves a significant price movement in one direction which sucks in the masses of traders; pushing once and failing, then pushing a second time and again failing.
It really plays with their emotions. The first move gets them excited about great profits. The first failure worries them. The second move relieves that pressure and again gives them hope. The second failure destroys them.
We of course aim to enter in the opposite direction, at the point of their exit, if not before.
The key is context. The pattern must provide some kind of significant move, such as:
- A gap opening
- Break of a major S/R level
- Break of a significant swing high/low
And ideally the pattern should be operating against your market bias, or be one that changes your bias.
Let's look at some examples across different timeframes.
And it even applies down at the scalping level where I trade (1-3 range or 20 tick charts).
Great article, question though could these examples be considered 123 tops?
On a small timescale all “double failure patterns” will form either a 123 top or a double top.