Broadening tops and bottom – Pattern 1
Broadening tops:
Appearance:
Price trend moving upwards forming a microphone like pattern.
It makes lower lows and higher highs, then breaks the higher high zone causing the breakout.
Volume: Volume should be greater than usual limit to confirm the entry.
Time: 29 candles
Movement: 29% increase for a long time trade. Intraday target can be the price length of the mic.
Probability of Success: 82%.
Probability of failure: 8%
Keys: Good if we have continuous green candle. Keep holding until breaking the previous candles low.
Broadening Bottom:
Price trend moving downwards forming a microphone like pattern.
It makes lower lows and higher highs, then breaks the Lower low zone causing the breakout.
Volume: Volume should be greater than usual limit to confirm the entry.
Time: 16 candles
Movement: 20% decrease for a long time trade. Intraday target can be the price length of the mic.
Keys: Good if we have continuous and long red candle.
Endnote:
Patience is the key here. Need to wait till breakout is complete. Do not pre-assume of the results and enter the trade. When entering the trade have a strict 1-2% stop-loss and breakout for 10-20% returns. Trading is all about probability. Work with risk management of 1:3.
If you are a option trader, try selling option at the zone of stop-loss strike price instead of buying. Do not buy naked call writing. Always maintain the risk reward in your favour.
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