Module 4 - Reversal and Continuation Patterns

The Responsible Trader Lessons


The Responsible Trader’s - POVModule 4 – Reversal and Continuation Patterns



The Responsible Trader’s - POV• The Responsible Trader's POV (Point of View).

• These are my notes, my own additional research and studies on the Topic that I posted, and my personal observations and opinions that I am sharing to further enhance our knowledge and understanding.

• Some of these were previously posted on “The Responsible Trader” thread, Stock Market Pilipinas (www.stockmarketpilipinas.com). This is the latest version of previous posts I made.

• Some of these plus further explanations and discussions will be appearing in my forthcoming book “The Responsible Trader.”

http://www.stockmarketpilipinas.com/



Quick Review – What is the Proper Term for the Troughs and the Peaks in both Uptrend and Downtrend?

The Peaks are called Resistance. It is the opposite of Support and represents a price level or area where selling pressure overcomes buying pressure.

The Troughs are called Support. This is a level or area on the chart where buying Interest is sufficiently strong to overcome selling pressure



Quick Review – What are the Degrees of a Trend?

1. Major trend – anything over six months

2. Intermediate or secondary trend – three weeks to three months

3. Near term trend –anything less than two or three weeks.



Quick Review – What is Role Reversal when we talk about Resistance and Support?

Role Reversal means Resistance turning to Support and vice versa.Once a resistance or support level is broken, its role is reversed. If the price falls below a support level, that level will become Resistance. If the price rises above a Resistance level, it will often become Support



Module 4 – Reversal and Continuation Patterns• Collectively these are called Chart Patterns and this is where newbies

encounter a lot of difficulty when learning Technical Analysis.

• I will not discuss the lesson in the order presented on the Module. Instead, I will try to add value by sharing my own inputs.

• Warning: What follows next are my own personal ideas and observations.

• If you are not open to exploring new ideas with an open mind, you may close the video and go back to your regular routine. Anyway, the Chart Patterns have been discussed thoroughly in the MCTA Video.

• If you are open to exploring new ideas with an open mind, you may proceed.



Module 4 – Reversal and Continuation Patterns• This is a glimpse of the The Responsible Trading System - A system I

have developed myself. It is not the Holy Grail but it is a system that will help you trade the market without fear and without greed.

• I will start first with the basics to make it easier for everyone to understand.

• Think of Chart Patterns as consolidation. After consolidation, it could result into a Trend Reversal or a Trend Continuation

• The key to learning Chart Patterns is not memorizing but RECOGNITION and UNDERSTANDING. In this connection I would like to share with you

Pattern Recognition Method of the Responsible Trading System.



Responsible Trading System - Pattern Recognition Method

RED FOR RESISTANCE

GREEN FOR SUPPORT



Bulls Attack and Bears Defenses

ACTIVE

NEUTRAL

PASSIVE



Bears Attack and Bulls DefensesACTIVE

PASSIVE

NEUTRAL



Pattern Recognition Method - Application1. What is the Trend?

2. Who is in Control? Bulls or Bears?

3. Draw the Bulls Line of Attack/Defense.

4. Draw the Bears Line of Attack/Defense.

5. What Chart Pattern do you see?

Go to the next slide for the answers








Trend is Sideways or Flat

Nobody. Neither of them is in Control

Rectangle, can either be a Reversal or Continuation Pattern








Trend is Sideways not Flat but in Consolidation

Nobody. Neither of them is in Control

Symmetrical Triangle, again can either be a Reversal or Continuation Pattern








Trend is an Uptrend

Bulls are in Control.

Ascending Triangle. Since this is in a Context of an Uptrend when it breaks out is likely going to be a Continuation Pattern of the Uptrend.








Trend is a Downtrend

Bears are in Control

Descending Triangle. Since this is in a Context of a Downtrend when it breaks down is likely going to be a Continuation Pattern of the Downtrend.



Pattern Recognition – Application to Head &Shoulders Pattern

Trendline BreakFailure Swing

Neckline Support



Pattern Recognition PracticeThere are 5 Chart Patterns Here. Using the Pattern Recognition Method of The Responsible Trading System can you name them?




Pattern Recognition Practice - Answers

AscendingTriangle

Head and Shoulders

Descending Triangle

Inverse HeadAnd Shoulders

Rising Wedge



Do you want to know more about Responsible Trading? Please visit, like and share:

a. My Blog: http://www.theresponsibletrader.com – where I write and share lessons on trading and my thoughts about trading in particular and life in general

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c. YouTube Channel: https://www.youtube.com/theresponsibletrader – where you can view and download my TRT-POV (The Responsible Trader’s Point of View) and other videos I intend to make

d. My Slideshare: http://www.slideshare.net/TheResponsibleTrader – where you can view and download copy of the Powerpoint Presentation of my TRT-POV (The Responsible Trader’s Point of View) and other presentations I intend to make

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Module 4 - Reversal and Continuation Patterns

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Transcript of Module 4 - Reversal and Continuation Patterns