This reversal pattern can be found at the end of the trend if:

1. TL is broken.
2. PA failed to make HH ( for Sell ) or LL ( for Buy ).
3. BO of 2 ( confirmation that the trend is changed ).





This is a Price Action Strategy and for better understanding this you should check this strategy, too: Swings Trading ( Price Action Trading )


Lets see an example on the chart:



In our example, we have a retest of the BO of 2 level, but it doesn't happend all the time. That's why for proper trading this strategy, you can use only 1 pending order, Buy Stop/Sell Stop at the Break Out of 2.

SL can be @ 3, but also you can use a more relaxed SL, below 1 level.
For TP we project the same distance in pips, as between 1 and 2 level.


Best Regards,
^^_Lord_Ice_^^

Swings ( waves ) are PA formations, described as an impulse, followed by a correction, during trends and counter trends. Every trend have ups and downs (swings ).

Best way to see the swings, is to draw them manually, connecting with lines the Higher Highs and the Lower Lows.



Now all we have to do is to mark the swings:

HH = Higher High
LL = Lower Low
LH = Lower High
HL = Higher Low



So for an UP Trend ( bullish ) we will have swings:

LL-HH-HL-HH-HL...

And for a DOWN Trend ( bearish ) we will have swings:

HH-LL-LH-LL-LH...

So based on the swings and PA, we might use the next strategies:

1. Trend Lines BO 

2. Support & Resistance Lines ( S/R Lines )
3. Channels

For trading the swings, SL should always be a large one ( previous HH or LL ).

Best Regards,
^^_Lord_Ice_^^

A Simple Moving Average is the average of a series of prices, over a period of time which is constantly updated by dropping the oldest value and then adding the newest value and recalculating the average.

For Exponential Moving Average, the formula is changed and the last prices count more than the oldest ones.

MA is used for trading, as a "mobile" Trend Line or S/R Line ( range market ), because every time a new candle is closed the "line" is drawing that change in PA.

Also, MAs, even if there aren't used as crossing strategy, can be used as trend indicator ( like a TL, adjusted every time a new candle is formed ).

There are many ways we can use it as trading strategies, too.

1. One Moving Average BO

For example we can use 50 SMA, like this.



1. Always use the direction of the MA to establish trend for swing
2. When 50 SMA point UP, look to BUY only, when 50 SMA point DOWN look to SELL only.
3. After trend is confirmed ( SMA pointing UP or DOWN ), you can open a buy ( in our example ), after PA closed above 50 SMA. SL would be the LL of the candle that made the BO or the previous LH ( we are in a uptrend now ).
4. After that, you can add more positions ( BUY ) on every retest that failed to break below 50 SMA or other crossing ( from below-above ) between PA and 50 SMA. SL would be previous LH or the LL of the candle that made the BO (crossed the 50 SMA ).

2. Two or more Moving Averages Crossing

This is the common use of MAs for trading. For example we can use 20 SMA, 100 SMA, like this.



1. Previous down trend is over, 20 SMA crossed above 100 SMA, we look to BUY opportunity.
2. PA retested the SMA 100 = BUY, SL would be @ previous LL.
3. Candle closed above 20 SMA, you can also BUY , the next candle opening. SL would be @ previous LL.
4. After the BO of the new formed HH, move the SL to next HL ( our entry ) until BE, or use trailing stop.
5. You can also add more BUY positions on every crossing UP ( 20SMA over 100 SMA ), or new closed candle above 20 SMA ( when changing directions again from pointing DOWN to pointing UP - rejection from 100 SMA)

In this way you can also add the 3rd SMA and add positions to the crossing of first 2 ( 20 and 50 ) and use SMA 100 for trend direction confirmation.



If in this example, 20 and 50 SMA, cross below 100 SMA, the long trend is over and we look for sell opportunities only.

3. Moving Averages and TL or S/R Lines

As I said, MAs are also good for indicating ( pointing ) the main trend.



But another way you can use 50 SMA is to confirm BO. One of the best ways to do it is to trade TL's BO on the main swing trend like this.



To read more how to setup the trades using TL's BO systems, SL and TP, go here.


4. 200 EMA using multi TF

This is one of the best trading strategies. Very simple and yet so effective ( you will never be against the trend ).



1. Daily chart, PA is below 200 EMA
2. H4 chart, PA is below EMA
3. M15 chart "bucking" the trend and must also go below 200 EMA.
4. For filtering the entry, on M15, you can use Stochastic oscillator crossing from top to bottom ( crossing 80% - oversold level )
5. SL would be previous @ LH ( down trend ).


Best Regards,
^^_Lord_Ice_^^

Channels are basically 2 parallel TL drawn on the chart, that contain LL and HH of PA's last swings. There are many ways to trade channels.

1. The common use of channels is to trade it as Trend Lines BO or Pullback ( rejection ).


2. Also, when the formed channel is horizontal we can trade it as S/R Lines BO or Pullback ( Rejections ).



3. BO Boxes Channel Trading Strategy

After we found a channel on higher TF we can lower the TF to M30 to find our first BOX. Then we can use it to keep add positions or to move SL until BE.



Also using same technique with boxes, you could of predict the drawn channel forming since beginning. All you have to do is to find first pullback and make a box of it.



Sl would be opposite BOX direction. You can add positions, move SL ( BE ) when it's BO of the BOX, or use Trailing Stop = BOX pips. ( HH-LL ).

From my experience this work better on London's opening and no important news in that day for the pair you trade.



Best Regards,
^^_Lord_Ice_^^

Support & Resistance Lines ( S/R Lines ) are horizontal lines connecting at least 2 previous HH or LL of PA on the chart.



To draw S/R Lines we can use HH/LL or close price, as our R Line from the chart above.

The common mistake of trading these S/R Lines, is to consider them ...lines. S/R Lines are actually Zones.

Normally second R Line is a LH on the chart ( is a resistance when we connect at least 2 previous HH/LL ).




In this example using zones, we could connect our second R Line with previous LL/HH. ( since there are sometimes 10p-20p difference, between those levels ). Using only a line we can't connect them properly.
 
Every broken Support, becomes Resistance and every Resistance broken, becomes Support.

There are many ways to trade S/R Lines.

1. S/R Lines BO Strategy.

After a candle broke a S/R Line and close below you can entry on the next candle opening, with a SL above the candle's high ( our example is a short one ).



For TP you may use Trailing Stop, BE ( moving SL after each further BO ) or find the next Support Zone pullback. ( rejection ).

2. S/R Lines Pullback Strategy ( rejections )

If you look carefully at our previous chart, you will see that was a false BO of the S Line on the bottom of the chart. If we would of drawn a Line, we might of trade it as a BO of S Line.

But since we've considered a S Zone ( connecting the last previous low and the last one ), we look for a candle to close above to entry. ( rejection )


3. S/R + TL BO Strategy

An interesting idea of trading S/R Lines is to combine it with TL.





For trading it like this all we have to do is to lower the TF ( we used H4 and now we entry on H1 - for proper entry and a tight SL ).


4. Pending Order @ Retest previous BO of S/R Strategy

This is one of the best and yet simpliest trading strategy I've ever found.




Ypu can use pending order for this ( after previous BO ), or use rejection from R Zone.
Your SL would be @ new formed HL. For TP you can use previous LL, BE or Trailing Stop.


Best Regards,
^^_Lord_Ice_^^