free download links about online stock trading, forex, futures, stock investing, market, trading systems
Technical Formation Templates
Back to contents page

 

Box 19.8
Brief situation description:	The market has formed an inclined channel, which can be identified on hourly and daily charts. This trade would be the continuation of the one described in Box 19.6 (in case the stops were triggered and the position reversed). It can also be traded independently, and the signal to enter the market would be the break of the border of such a channel.
Currency recommended for a trade:	All majors and crosses.
Trade characteristics:	Basic (conservative).
Trade (entry point) suggestions:	Enter the market on the break of the lower side of an ascending channel or at the upper border of a descending one.
Entry time:	Any time.
Entry execution:	Entry-stop order.
Stop loss placed:	The opposite side of the current day range (if close enough).		Other technical level inside the current day range.
Reverse if stops triggered:	Recommended (automatic entry-stop order) at the opposite side of a current day range.
Target (custom choice):	Average daily range (PI)	End of the day (P2)		Other
Potential profit estimation:	N/A
Profit probability	High
Risks evaluation:	Low
P/L ratio:	Neutral to Positive
Potential advantages in favor of the open position:	N/A
Possible complications, disadvantages, and risk warnings, and solutions to avoid them:	N/A
Additional notices, recommendations, and trading tips:	Such a trade can also be turned into a longer-term position with technical targets located outside the day-trading range. In this case, the position was open following a signal indicating potential trend change, and might be kept for longer term.

 

Box 19.9
Brief situation description:	The market has formed a triangle, which can be identified on intraday or daily charts.
Currency recommended for a trade:	All majors and crosses.
Trade characteristics:	Basic (conservative).
Trade (entry point) suggestions:	Enter the market on the break of either side of a triangle.
Entry time:	Any time.
Entry execution:	Entry-stop order.
Stop loss placed:	The opposite side of the triangle (if it is narrow enough).	The opposite side of the current day range (if close enough).		Other technical level inside the current day ranges (if choice #2 is outside the acceptable risk level).		Other.
Reverse if stops triggered:	Recommended (automatic entry-stop order) in cases 1 and 2.
Target (custom choice):	Average daily range (PI)		End of the day (P2)		Other
Potential profit estimation:	N/A
Profit probability	High
Risks evaluation:	Low
P/L ratio:	Neutral to Positive
Potential advantages in favor of the open position:	This trade is easy to plan in advance, because there is always enough time to identify the triangle and to make a sufficient trading plan. Also, the false break is mostly as good as a true one and indicates the market's intention to choose the opposite direction for the next move, which is also important for planning of the next trade.
Possible complications, disadvantages, and risk warnings, and solutions to avoid them:	N/A
Additional notices, recommendations, and trading tips:	It should be remembered that usually a break follows a fourth touch of a triangle's borderline. Such a trade can be turned into a longer-term position with technical targets located outside of the day trading range if a particular triangle is big enough.

 

FIGURE 19.9a

Box 19.10
Brief situation description:	The market is forming a potential triangle, which can be identified on hourly or daily charts. Such a conclusion can be made only after the market has already formed one of the sides of the triangle completely. Completely means that one borderline of such a formation can be drawn through three or more significant points (highs or lows). It also has two significant points on the other side, which allow us to guess that the pattern we can see now will become a triangle in the near future.
Currency recommended for a trade:	All majors and crosses.
Trade characteristics:	Trade of opportunity.
Trade (entry point) suggestions:	Enter the market at the projected point, where the third touch of the second side of the triangle takes place. The position should be open in the direction of the opposite side of the formation.
Entry time:	Any time.
Entry execution:	Limit or market order.
Stop loss placed:	20 pips behind the nearest borderline, which is forming a triangle.
Reverse if stops triggered:	Recommended (automatic entry-stop order).
Target (custom choice):	Average daily range (PI)	End of the day (P2)	The opposite side of a triangle (P3)
Potential profit estimation:	N/A
Profit probability evaluation:	Average
Risks evaluation:	Average
P/L ratio:	Positive
Potential advantages in favor of the open position:	This trade is easy to plan in advance, because there should be enough time to identify a triangle even while it is still in the forming process.
Possible complications, disadvantages, and risk warnings, and solutions to avoid them:	N/A
Additional notices, recommendations, and trading tips:	In case the stops are triggered and the position was reversed, the initial loss most likely will be covered soon enough. It should also be remembered that usually a break follows a fourth touch of a triangle's borderline. Such a trade can be turned into a longer-term position with technical targets located outside of the day trading range if a particular triangle is big enough.

Box 19.12
Brief situation description:	The market is forming a potential diamond formation, which can be identified on hourly or daily charts. Such a conclusion can be made only after the market has already formed the left side of the formation (which is nothing but a broadening triangle) and at the moment is forming a second half of the formation. The second half is also a triangle, but a regular one. So, the recommendations for a trade are pretty much the same as in the case of a regular triangle.
Currency recommended for a trade:	All majors and crosses.
Trade characteristics:	Trade of opportunity.
Trade (entry point) suggestions:	Enter the market at the projected point where the third touch of the second side of the triangle (second diamond part) takes place. The position should be open in the direction towards the opposite side of the formation.
Entry time:	Any time.
Entry execution:	Limit or market order.
Stop loss placed:	20 pips behind the nearest borderline, which is forming a triangle.
Reverse if stops triggered:	Recommended (automatic entry-stop order).
Target (custom choice):	Average daily range (PI)	End of the day (P2)	The opposite side of a diamond (P3)
Potential profit estimation:	N/A
Profit probability evaluation:	Average
Risks evaluation:	Average
P/L ratio:	Positive
Potential advantages in favor of the open position:	This trade is easy to plan in advance, because there should be enough time to identify a triangle even while it is still in the forming process.
Possible complications, disadvantages, and risk warnings, and solutions to avoid them:	N/A
Additional notices, recommendations, and trading tips:	In case the stops are triggered and the position was reversed, the initial loss most likely will be covered soon enough. Remember that usually a break follows a fourth touch of a triangle's borderline. Such a trade can be turned into a longer-term position with technical targets located outside of the day trading range, if a particular triangle is big enough.

 

Box 19.13
Brief situation description:	The market is forming a potential head and shoulders formation (inverted H&S formation as well) on hourly or daily charts, which cannot be identified as such since it is only a projection at the moment. The projection can be made at the moment when the market has already formed what may appear to be the left shoulder, the head, and the first half of the right shoulder. It works best when seen on hourly and daily charts.
Currency recommended for a trade:	All majors and crosses.
Trade characteristics:	Trade of opportunity.
Trade (entry point) suggestions:	Enter the market at the projected point where the projected top (bottom) of the second shoulder could be formed.
Entry time:	Any time.
Entry execution:	Limit or market order.
Stop loss placed:	Depends on the time frame and the scale of the potential formation. The trailing stop can also be used if some floating profit accumulated.
Reverse if stops triggered:	Not recommended.
Target:	Measured objective (PI)
Potential profit estimation:	N/A
Profit probability	Below average
Risks evaluation:	Above average
P/L ratio:	Positive
Potential advantages in favor of the open position:	N/A
Possible complications, disadvantages, and risk warnings, and solutions to avoid them:	This trade is not easy to plan in advance. A good imagination should help, but, from the other side, it can be excessive too. The trade also requires a lot of practical experience from a trader.
Additional notices, recommendations, and trading tips:	In case of a successful entry, the profit is usually very significant, especially to enter the position on a bigger scale. It is better for longer-term positional trading rather than for intraday.

 

 

Box 19.14
Brief situation description:	A head and shoulders formation (inverted H&S formation as well) is fully formed on hourly or daily charts.
Currency recommended for a trade:	All majors and crosses.
Trade characteristics:	Classic (textbook style).
Trade (entry point) suggestions:	Enter the market on the break of the neckline.
Entry time:	Any time.
Entry execution:	Entry-stop order.
Stop loss placed:	The opposite side of the day range.		Above (below) the top (bottom) of the right shoulder.
Reverse if stops triggered:	Recommended.
Target:	Measured objective (PI)	End of the day (P2)		Average daily range (P3)	Other
Potential profit estimation:	N/A
Profit probability	Average
Risks evaluation:	Average
P/L ratio:	Positive
Potential advantages in favor of the open position:	N/A
Possible complications, disadvantages, and risk warnings, and solutions to avoid them:	N/A
Additional notices, recommendations, and trading tips:	Although this formation is classic (that means it is widely known and easily recognizable), the chance that the market will behave exactly the way as it is described in technical analysis textbooks is questionable. 1 do not usually trade on it without having some other reasons to enter a position at the break of a neckline of H&S. However, sometimes it works and, therefore, cannot be ignored completely. Usually the harder the identification, the better it works.

Box 19.15
Brief situation description:	A double (triple) top (bottom) formation is fully formed on hourly or daily charts.
Currency recommended for a trade:	All majors and crosses.
Trade characteristics:	Classic (textbook recommended).
Trade (entry point) suggestions:	Enter the market on the break of the neckline.
Entry time:	Any time.
Entry execution:	Entry-stop order.
Stop loss placed:	The opposite side of the day range		Above (below) the line drawn through both tops (bottoms)		Other
Reverse if stops triggered:	Recommended
Target:	Measured objective (PI)	End of the day (P2)		Average daily range (P3)	Other
Potential profit estimation:	N/A
Profit probability evaluation:	Below average
Risks evaluation:	Above average
P/L ratio:	Positive
Potential advantages in favor of the open position:	N/A
Possible complications, disadvantages, and risk warnings, and solutions to avoid them:	N/A
Additional notices, recommendations, and trading tips:	Same thing as with the H&S formation. This formation is also a classic one, but the chance to see the exact behavioral pattern prescribed by technical analysis textbooks is slim. 1 do not usually trade on it without having some other reasons to enter a position at the neckline break.

 

Box 19.11
Brief situation description:	The market has formed a diamond, which can be identified on intraday or daily charts. Because the diamond can be considered as two triangles merged together, the recommendations are basically the same as in the case of a regular triangle. See Box 19.9.
Currency recommended for a trade:	All majors and crosses.
Trade characteristics:	Basic (conservative).
Trade (entry point) suggestions:	Enter the market on the break of either side of a diamond.
Entry time:	Any time.
Entry execution:	Entry-stop order.
Stop loss placed:	The opposite side of the triangle (if it is narrow enough).	The opposite side of the current day range (if close enough).		Other technical level inside the current day ranges (if choice #2 is outside the acceptable risk level).		Other
Reverse if stops triggered:	Recommended (automatic entry-stop order) in cases 1 and 2.
Target (custom choice):	Average daily range (PI)		End of the day (P2)		Other
Potential profit estimation:	N/A
Profit probability evaluation:	High
Risks evaluation:	Low
P/L ratio:	Neutral to Positive
Potential advantages in favor of the open position:	This trade is easy to plan in advance, since there is always enough time to identify the triangle and to make a sufficient trading plan. Also, the false break is mostly as good as a true one and indicates the market's intention to choose the opposite direction for the next move, which is also important for planning of the next trade.
Possible complications, disadvantages, and risk warnings, and solutions to avoid them:	N/A
Additional notices, recommendations, and trading tips:	A diamond is a rare formation. The first half of it could be a real disaster for a trader, because it represents a broadening triangle that is very difficult to identify before it is fully formed and very difficult to trade on. The rest is much easier, and no particular problem with trading on diamond should arise. It has to be remembered that usually a break follows a fourth touch of diamond's second half borderline. Such a trade can be turned into a longer- term position with technical targets located outside the day trading range, if a particular diamond is big enough.

Smarter trading The art of day trading Trading Chaos Sane Investing In An Insane World