Continuation (Bullish)
Linda Raschke (Street Smarts)
Execution Rules:
Entry: In an uptrend (ADX > 30), wait for price to touch the 20-period EMA. Buy stop above the High of the touch candle.
Stop: Below the Swing Low of the pullback.
Target: Test of the recent High.
Performance:
Win Rate: ~60-65%
High statistical probability of retesting the highs in a strong trend. The most reliable trend-continuation setup.
Best Market Condition:
Strong Bull Trend (ADX > 30).
Continuation (Emerging Trend)
Richard Dennis (The Turtle Traders)
Execution Rules:
Entry: Buy when price breaks the 20-Day High (Donchian Channel).
Stop: Below the 10-Day Low.
Target: Trailing Stop (ride the trend until the 10-Day Low is broken).
Performance:
Low Win Rate (~40%) / High R:R
Low win rate, but large payouts from catching multi-month trends generate high profits. Requires supreme discipline and patience.
Best Market Condition:
Transition from Range to Trend.
Range-Bound
Jim Simons (RenTech / Quants)
Execution Rules:
Entry: Price hits upper Bollinger Band (2 Std Dev). RSI > 70. Short when price closes back inside the band.
Stop: Just outside the range or wick.
Target: The Moving Average (Center line of Bollinger Band).
Performance:
Win Rate: ~70%
High win rate because prices revert to the mean often in sideways markets. Warning: Fails immediately if a new trend starts.
Best Market Condition:
Range-Bound / Choppy (ADX < 20).
Continuation (Low Volatility)
John Carter (Mastering the Trade)
Execution Rules:
Entry: Bollinger Bands go inside Keltner Channels (Squeeze). Buy when momentum fires Up and price breaks out.
Stop: Below the recent accumulation range (swing low).
Target: Ride the momentum wave (usually 8-10 bars of expansion).
Performance:
High Velocity
Squeezes reliably precede explosive moves (often >10-15% in short timeframes). The edge comes from capturing the volatility expansion.
Best Market Condition:
Low Volatility / Compression.
Continuation (Bearish)
Thomas Bulkowski (Encyclopedia of Chart Patterns)
Execution Rules:
Entry: In a strong downtrend (ADX > 30), price consolidates upward or sideways on lower volume (the "Flag"). Short when price breaks below the low of the flag pattern.
Stop: Above the highest point of the flag consolidation.
Target: Measured Move (Calculate the length of the "Flagpole" drop and project it downward from the breakout point).
Performance:
High Reliability in Trends One of the most reliable continuation patterns. It allows traders to enter an existing trend with defined risk. The "pause" (flag) confirms that buyers are weak and merely covering shorts, not initiating new positions.
Best Market Condition:
Strong Bear Trend / Panic Sell-Offs
Breakout (Bearish)
John Murphy (Technical Analysis of the Financial Markets)
Execution Rules:
Entry: Price forms a series of Lower Highs but bounces off a flat horizontal Support level. Short when price closes decisively below the support line.
Stop: Just above the most recent "Lower High" swing point.
Target: The height of the triangle (widest part) projected downward from the breakdown point.
Performance:
Visualizing Seller Aggression This pattern visibly shows sellers getting more aggressive (willing to sell at lower and lower prices) while buyers hold a static line. When buyers finally give up (support breaks), the floor collapses.
Best Market Condition:
Distribution Phase / Early Bear Market
Momentum (Intraday)
Ross Cameron / Andrew Aziz (Day Trading Styles)
Execution Rules:
Entry: Stock gaps up (or down) significantly (>3%) on high pre-market volume. Wait for the first 1-minute or 5-minute candle to close. Buy the breakout of that candle's High (or Short the break of the Low).
Stop: At the opposite end of the entry candle (Low of the first candle).
Target: Momentum burst (exit at first sign of stalling or 2R).
Performance:
High Velocity / Low Duration Capitalizes on the imbalance between supply and demand at the market open. Very high success rate during Earnings Season but requires fast execution (often automated).
Best Market Condition:
Earnings Season / News Catalysts / High Volatility Open
Volatility (Price Action)
Al Brooks (Price Action Trading)
Execution Rules:
Entry: A candle forms completely inside the range (High to Low) of the previous candle (Mother Bar). Place a Buy Stop above the Mother Bar High and a Sell Stop below the Mother Bar Low.
Stop: At the opposite end of the Mother Bar.
Target: 1:2 Risk/Reward or the next major Support/Resistance level.
Performance:
Directionally Agnostic This strategy does not guess the direction; it pays for the volatility expansion that inevitably follows a period of contraction (the inside bar). It works as a "Trend Resume" signal or a powerful "Reversal" signal depending on context.
Best Market Condition:
Low Volatility / Indecision (waiting for a breakout)
Reversal (Bullish)
Larry Connors (Quant Trader)
Execution Rules:
Entry: Day 3 or 4. Buy when RSI(2) < 10 and price closes lower 3 days in a row.
Stop: Hard stop at the Low of Day 3.
Target: Sell on close when RSI(2) > 70 or touches 5-Day SMA.
Performance:
Win Rate: ~70-75% (Short Term)
High-probability mean reversion for a 2-5 day bounce. Requires perfect timing and strict stops.
Best Market Condition:
Panic Sell-Offs / Crashes (VIX > 30).
Reversal (Bullish)
Victor Sperandeo ("Trader Vic")
Execution Rules:
Entry: Price breaks a prior Low, then closes back above that Low. Buy the breakout of that candle's High.
Stop: Just below the absolute Low of the "flush" candle.
Target: Previous Swing High (Risk/Reward 1:3).
Performance:
High Risk/Reward (approx 1:3)
Moderate win rate (~50-55%), but large payouts make it effective for catching sharp V-shaped bottoms.
Best Market Condition:
Testing Major Support Levels.
Reversal (Bullish)
Richard Wyckoff (Market Cycle Theory)
Execution Rules:
Entry: Massive volume spike (2x-3x avg) on a wide-range down candle. Wait for a "Test" (higher low on lower volume) to enter.
Stop: Low of the Climax candle.
Target: The peak of the initial "Automatic Rally" after the climax.
Performance:
High Reliability at Major Lows
The volume confirms exhaustion. Qualitative evidence is strong; necessary for any lasting bottom.
Best Market Condition:
Events/News Shocks (Forced liquidation).
Reversal (Bullish)
Dr. Alexander Elder (Triple Screen)
Execution Rules:
Entry: Price makes a Lower Low, but RSI makes a Higher Low. Enter on the close of the candle when RSI crosses back above 30.
Stop: Below the recent price low.
Target: RSI hits 60-70 or next major Resistance.
Performance:
Medium-High Reliability (Leading Signal)
One of the strongest technical signals for trend exhaustion. Works best when confirmed by a chart pattern (e.g., Double Bottom).
Best Market Condition:
Grinding/Slow Bear Markets (Momentum dying).
Reversal (Bullish)
Steve Nison (Candlesticks)
Execution Rules:
Entry: A large green candle completely "engulfs" the body of the prior red candle. Buy on the close of the green candle.
Stop: Below the low of the green candle.
Target: Next major Resistance level.
Performance:
~63-68% Win Rate
A high-frequency pattern that is most reliable when it occurs right at a well-known support level.
Best Market Condition:
Intraday or Daily Reversals.