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Squirrel Trader Notes: Over Extended Bullish – Pattern 101 Bullish reversal pattern which indicates a possible bullish reversal. R2 to S2 as a normal change in price. Capitalize on the Bullish reversal when the price finally finds support. Object is to go long when this is found. Over Extended Bearish – Pattern 102 Indicating a possible Bearish Reversal. This presents an opportunity to go short. Object is to capitalize when the price finds its Resistance point at R1 and take the retracement. The more the price is extended the greater the recoil will be. S2 to R2 is much less in magnitude and time that S1 to R1. Bull Pull Back – Pattern 103 Bull Pattern showing Higher pivot highs and higher pivot lows. Trend: S1 > S1, R2 > R3: R1 > R2 Momentum: (R1 – R2) > (R2 – R3) The distance expands as the pattern develops. An Example play using this pattern is to Buy Long. Bearish Pullback – Pattern 104 This is defined by a increasing momentum in the Bearish Direction. Lower pivot Highs and Lower Pivot lows in an increasing magnitude. The Distance Expands and the Pattern Develops. An Example play using this pattern is to Sell or Short the Stock. Bullish Breakout – Pattern 105 Higher Pivot highs and Higher Pivot lows. This is an increasing Bullish Momentum. The Objective of this Pattern is to Capitalize on the increasing Bullish Momentum when the Price Breaks the Prior Resistance level – R1 to the Next level of Resistance. An Example Play of this Pattern is to Buy Long to the next Resistance Level. Bearish Breakdown – Pattern 106 Lower Pivot highs and Lower Pivot lows. This is an increasing Bearish Momentum. The Objective of this Pattern is to Capitalize on the increasing Bearish Momentum when the Price Breaks the Prior Support level – S1 to the Next level of Support. An Example Play of this Pattern is to Sell Short to the next Support Level. Bullish Divergence – Pattern 107 This is a bullish divergence pattern which is defined by lower pivot highs and lower pivot lows. This Pattern illustrates slowing bearish momentum because the distance between the pivot lows decreases as the pattern develops. The Objective of this pattern is to capitalize on the Bullish reversal indicated by slowing momentum at S1. Example play using this pattern is to Buy Long. Bearish Divergence – Pattern 108 This is a bearish divergence pattern which is defined by Higher pivot highs and Higher pivot lows. This Pattern illustrates slowing bullish momentum because the distance between the pivot Highs decreases as the pattern develops. The Objective of this pattern is to capitalize on the Bearish reversal indicated by slowing momentum at R1. Example play using this pattern is to Sell Short. Bullish Divergence – Pattern 109 This is a bullish Reversal pattern which is defined by lower pivot highs and lower pivot lows. This Pattern illustrates slowing bearish momentum because the distance between the pivot lows decreases as the pattern develops. The objective of this pattern is to capitalize on the Bullish breakout above R1 – Which is the Defining Event of the Bullish Reversal of the Trend. An Example Play using this pattern is to Buy Long. Bearish Divergence Breakdown – Pattern 110 This is a bearish Reversal pattern which is defined by Higher pivot highs and Higher pivot lows. This Pattern illustrates slowing bullish momentum because the distance between the pivot highs decreases as the pattern develops. The objective of this pattern is to capitalize on the Bearish breakdown below S1 – Which is the Defining Event of the Bearish Reversal of the Trend. An Example Play using this pattern is to Sell short. Divergent Breakdown Retracement – Pattern 111 Opposite of 112. This is a Bearish pattern and the first retracement of a newly forming bearish trend. It is important to note that S1 has broken the previous bullish trend high of S2 signifying a change in the previous trend. This Pattern illustrates a previously slowing bullish momentum because the distance between the Pivot highs decreases as the pattern develops. The Objective of this Patter is to capitalize on the first bearish pullback in the newly forming trend. An Example play using this pattern is to Sell Short. Divergent Breakout Retracement – Pattern 112 This is a Bullish pattern and the first retracement of a newly forming bullish trend. It is important to note that R1 has broken the previous bearish trend high of R2 signifying a change in the previous trend. This Pattern illustrates a previously slowing bearish momentum because the distance between the Pivot lows decreases as the pattern develops. The Objective of this Patter is to capitalize on the first bullish pullback in the newly forming trend. An Example play using this pattern is to Buy Long. Head & Shoulders Top – Pattern 113 This is a bearish reversal pattern which is defined by the previous 3 resistance levels forming a head and shoulders formation notated in yellow. This Pattern illustrates slowing bullish momentum because the distance between the pivot Highs decreases as the pattern develops. Notice that an official break in support has not occurred at this point and support is still trending upward. The Objective of this pattern is to capitalize on the previous slowing bullish momentum and take a bearish position on the potentially failing bullish trend. An example play using this pattern is to Sell Short. Head and Shoulders Bottom – Pattern 114 This is a bullish reversal pattern which is defined by the previous 3 support levels forming a head and shoulders formation notated in yellow. This Pattern illustrates slowing bearish momentum because the distance between the pivot lows decreases as the pattern develops. Notice that an official break in resistance has not occurred at this point and resistance is still trending downward. The Objective of this pattern is to capitalize on the previous slowing bearish momentum and take a bullish position on the potentially failing bearish trend. An example play using this pattern is to Buy Long. Head and Shoulders Breakdown – Pattern 115 This a bearish reversal pattern which is defined by the previous 3 resistance levels forming a head and shoulders formation notated in yellow. This Pattern illustrates slowing bullish momentum because the distance between the pivot Highs decreases as the pattern develops. This pattern is used to take advantage in the break of the in the previous trends last support level, or S1. A break at this point will constitute a bear shift in the trend. The Objective of this pattern is to capitalize on the previously slowing bullish momentum and take a bearish position on the first breakdown of the previous trends support located at S1 An example play using this pattern is to Sell Short. Head & Shoulders Breakout – Pattern 116 This is a bullish reversal pattern which is defined by the previous 3 support levels forming a head and shoulders formation notated in yellow. This Pattern illustrates slowing bullish momentum because the distance between the pivot Lows decreases as the pattern develops. This pattern is set to take advantage of the break in the in the previous trends last resistance level, or R1. A break at this point will constitute a bullish shift in the trend. The Objective of this pattern is to capitalize on the previously slowing bearish momentum and take a bullish position on the first breakout of the previous trends resistance located at R1 An example play using this pattern is to Buy Long. Head and Shoulders Top Retracement – Pattern 117 This is a bearish continuation pattern which is created by newly formed bearish trend and follows a previously defined head and shoulders reversal pattern as notated in yellow. This pattern illustrates the first retracement after the official breakdown of prior support at S2. Because a new bearish trend is forming, momentum is difficult to define. However, note that an increase in bearish momentum with give a higher probability to future bearish setups and a strengthening bearish trend. The objective of this pattern is to capitalize on the previously slowing bullish momentum and the breakdown of the bullish trend. The newly formed bearish trend has been confirmed by the break in previous support at S2 and gives a bearish position on the first retracement a higher probability. An example play using this pattern is to Sell Short. Head and Shoulders Bottom Retracement This is a bullish continuation pattern which is created by newly formed bullish trend and follows a previously defined head and shoulders reversal pattern as notated in yellow. This pattern illustrates the first retracement after the official breakout of prior resistance at R2. Because a new bull trend is forming, momentum is difficult to define. However, note that an increase in bullish momentum will give a higher probability to future bullish setups and a strengthening bullish trend. The objective of this pattern is to capitalize on the previously slowing bearish momentum and the breakout of the bear trend. The newly formed bullish trend has been confirmed by the break in previous resistance at R2 and gives a bullish position on the first retracement a higher probability. An example play using this pattern is to Buy Long. News Event Bullish Breakout – Pattern 1 This setup is preceded by neutral trading conditions followed by a news announcement that causes a bullish breakout above resistance. In the currency market, many news events are accompanied by an increase in volatility. This volatility often leads to break of either support or resistance. Special attention must be given to which currency within the currency pair will be affected by the news announcement and whether that affect with have a bullish or bearish result. The objective of this setup is to capitalize on the bullish breakout of resistance during or shortly after the news announcement. An example play using this setup would be to buy long the EUR/USD on a positive news announcement for the Euro or a negative news announcement for the USD. News Event Bearish Breakdown – Pattern 2 This setup is preceded by neutral trading conditions followed by a news announcement that causes a bearish breakdown below support. In the currency market, many news events are accompanied by an increase in volatility. This volatility often leads to break of either support or resistance. Special attention must be given to which currency within the currency pair will be affected by the news announcement and whether that affect with have a bullish or bearish result. The objective of this setup is to capitalize on the bearish breakdown of support during or shortly after the news announcement. An example play using this setup would be to sell short the EUR/USD on a negative news announcement for the Euro or a positive news announcement for the USD. Post News Bullish Pullback – Pattern 3 This setup is preceded by a bullish breakout above resistance produced by a news announcement. The breakout is then followed by a pullback to support. This support is determined by the next upward movement in price. In the currency market, many news events are accompanied by an increase in volatility. This volatility often leads to break of either support or resistance. If a breakout opportunity is missed. It will often be followed by a pullback setup. The objective of this setup is to capitalize on the bullish pullback to support after a news announcement. An example play using this setup would be to buy long the EUR/USD on a positive news announcement for the Euro or a negative news announcement for the USD. Post News Bearish Pullback – Pattern 4 This setup is preceded by a bearish breakdown below support produced by a news announcement. The breakdown is then followed by a pullback to Resistance. This resistance is determined by the next downward movement in price. In the currency market, many news events are accompanied by an increase in volatility. This volatility often leads to break of either support or resistance. If a breakout opportunity is missed. It will often be followed by a pullback setup. The objective of this setup is to capitalize on the bearish pullback to resistance after a news announcement. An example play using this setup would be to sell short the EUR/USD after a negative news announcement for the Euro or after a positive news announcement for the USD. Bank Close Bullish Drift – Pattern 5 – EUR/USD Pair This setup is time sensitive and occurs approximately 2 hours prior to the New York session close. This trade is based on the currency’s reaction to the close of the London and German Markets which occurs approximately 2 hours before the US market close. As the London and the German markets close, they withdraw their supporting bids and offers. This decrease in trading activity causes the bearish trend of the day to lose its momentum resulting in a bullish drift. The Objective of this setup is to find a bearish trend that is down 1 ATR below its average trading levels on the daily chart. Approximately 2 hours before the US close the bearish trend will lose momentum due to the close of both the London and German markets. This trade seeks to capitalize on the approximate 20 Pip bullish drift that follows the close of those foreign markets. An example play using this setup would be to buy long the EUR/USD approximately 2 hours before the US market close on a bearish day that is trading 1 ATR below its normal range. Bank Close Bearish Drift – Pattern 6 – EUR/USD Pair This setup is time sensitive and occurs approximately 2 hours prior to the New York session close. This trade is based on the currency’s reaction to the close of the London and German Markets which occurs approximately 2 hours before the US market close. As the London and the German markets close, they withdraw their supporting bids and offers. This decrease in trading activity causes the bullish trend of the day to lose its momentum resulting in a bearish drift. The Objective of this setup is to find a bullish trend that is up 1 ATR above its average trading levels on the daily chart. Approximately 2 hours before the US close the bullish trend will lose momentum due to the close of both the London and German markets. This trade seeks to capitalize on the approximate 20 Pip bearish drift that follows the close of those foreign markets. An example play using this setup would be to sell short the EUR/USD approximately 2 hours before the US market close on a bullish day, that is trading 1 ATR below its normal range. Slow Time Bullish Dollar (Overdone RSI) – Pattern 7 – EUR/USD, GBP/USD & USD/CHF This Setup Takes place during slow market periods, and utilizes the RSI Indicator across 3 currency pairs. A bullish reversal of the dollar is likely to occur when the following conditions are met. RSI above 70 for the EUR/USD (Fiber) RSI above 70 for the GBP/USD (Cable) RSI below 30 for the USD/CHF (Swissie) The objective of this setup is to take advantage of bullish reversal of dollar due to an overdone RSI indicator on the EUR/USD, GBP/USD & USD/CHF. An example play using this setup would be to sell short the EUR/USD during a slow period in the market when the RSI is overdone on the EUR/USD, GBP/USD & USD/CHF. Slow Time Bearish Dollar (Overdone RSI) – Pattern 8 – EUR/USD, GBP/USD & USD/CHF Setup Takes place during slow market periods, and utilizes the RSI Indicator across 3 currency pairs. A bearish reversal of the dollar is likely to occur when the following conditions are met. RSI below 30 for the EUR/USD (Fiber) RSI below 30 for the GBP/USD (Cable) RSI above 70 for the USD/CHF (Swissie) The objective of this setup is to take advantage of bearish reversal of the dollar due to an overdone RSI indicator on the EUR/USD, GBP/USD & USD/CHF. An example play using this setup would be to buy long the EUR/USD during a slow period in the market when the RSI is overdone on the EUR/USD, GBP/USD & USD/CHF. Bullish Move on Rising Stochastic RSI – Pattern 9 This setup utilizes the Stochastic RSI indicator and occurs when the Stochastic RSI indicator is rising from below the 20 % line. The Objective of this setup is to take advantage of a likely bullish move as indicated by the Stochastic RSI rising from its overdone state. An Example play using this setup is to Buy Long the EUR/USD when the Stochastic RSI is rising from below the 20% line. Bearish Move on Declining Stochastic RSI – Pattern 10 This setup utilizes the Stochastic RSI indicator and occurs when the Stochastic RSI is falling from above the 80 % line. The Objective of this setup is to take advantage of a likely bearish move as indicated by the Stochastic RSI falling from its overdone state. An Example play using this setup is to Sell Short the EUR/USD when the Stochastic RSI is falling from above the 80% line. Bullish Overextended Bollinger – Pattern 11 This setup utilizes the Bollinger band indicator and occurs when the currency has a closing bar between lower 2nd and 3rd standard deviation bands. The objective of this setup is to take advantage of a likely bullish reversal due to overextended positions indicated by a closing bar between lower 2nd and 3rd standard deviation bands. An Example play using this setup is to Buy Long the EUR/USD when the currency has a closing bar between lower 2nd and 3rd standard deviation bands. Bearish Overextended Bollinger – Pattern 12 This setup utilizes the Bollinger band indicator and occurs when the currency has a closing bar between upper 2nd and 3rd standard deviation bands. The objective of this setup is to take advantage of a likely bearish reversal due to overextended positions indicated by a closing bar between the upper 2nd and 3rd standard deviation bands. An Example play using this setup is to Sell Short the EUR/USD when the currency has a closing bar between the upper 2nd and 3rd standard deviation bands.