Trends & Turnarounds – 2B Pattern + Interpretation of Market Behavior + Elliott Wave Principle
- Although the 1-2-3 Reversal is simple and effective, but when all the conditions are met, the volatile section is often missed.
- Therefore, there is a set of rules that can assist in establishing/clearing positions in advance, which is the 2B Pattern.
What is 2B Pattern (ex. Bullish Market)
(1) The price hits a new high, but the rally fails to advance and even sunk below the previous high
(2)The trend may appear with reversal
※Applicable to short-term, medium-term and long-term operation
If It’s Corroborated by the Candlestick Signal
Stop-Loss when 2B Pattern is Adopted
After entering the market according to the 2B Pattern, once the trend reaches a new high/low, stop loss immediately!
2B Pattern Market Model
First understand the membership structure in the exchange.
a.Investment broker → earn commission for executing client orders
b. Floor trader → trade for themselves
Usually, retail investors who entrust brokers to trade will set stop-loss orders to limit losses.
Familiar with the psychology of retail investors and the setting of stop loss points
(※Under the influence of major news, the stop loss points are usually located near the previous high/low point)
Investment Broker, Floor Trader
For their own interests, brokers and traders sometimes deliberately push up/suppress prices, forcing the stop-loss orders below to be filled, which can be said to be the professional activities of exchanges.
(Does the market always go in the direction that you originally expected after the order was stop-loss? Congratulations, you have been beaten by a routine) (If you encounter it, accept your fate, but don’t stop your loss because of this, it will be a big loss due to small mistakes)
How Analyst Uses It – ex. of Bull Trend
- Mostly used for 1 hour level (short-term trading);
- Always set Stop-Loss;
- It is never easy to precisely determine the rising and falling points of the band, so, as long as we were able to grasp the distance between the bounds conservatively;
- When depicting the horizontal reference line, we should mainly refer to the solid candlesticks.
- 5.It is regarded as one of the short-term arbitrage tools, but it is not used to determine the reversal of the trend;
- The trend line, wave theory and 1-2-3 rule are still better to determine the trend reversal.
Addendum – Flip Points for Wave Theory (Adv. Lvl.)
- The wave theory is too subjective to apply to professional speculation;
- But the A-B-C correction of the three waves is very valuable for reference
- Favorable judgment of the head & bottom
※The whole set of Elliot Wave Theory is a lot more complicated, and we shall go through it in depth next time.
After listening to these theories…
(1) Don’t you think the logic of these three principles are quite similar?
(2)When you were able to utilize these tools well, you may more easily forecast the projection;
(3)Suggested learning order:
Trend Line → 1-2-3 Reversal → 2B Pattern → Elliott Wave Theory
(4)Trade Along The Trend, Obey The Discipline
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