RichTL BOMB Strategy

RichTL BOMB Strategy

Consolidation periods and patterns in the currency markets can explode, leading to great profit opportunities. Sometimes suggestive of indecision, consolidation periods are great for capturing potential because the burst of directional action that follows can last for an extended period.

Understanding and trading on consolidation patterns will give the currency trader in the know two “edges”. First, the trader can hold his or her initial position for a shorter amount of time, thus minimizing the risk of holding positions in the case of higher rollover interest. Second, the profit potential from such a position can be big, as long as the trader follows strict, disciplined money management rules. Without money management, the trader might as well be playing with fire. Here we look at two different consolidation patterns and give you a step-by-step explanation of how to trade them.

In this section, we will learn how to find/define market consolidations objectively and how to trade them.

We will be using our famous indicator again, yes RichTL…

But how does RichTL help us find consolidation patterns? Let us go over some examples.

When RichTL swings are large in volume, the market would be trending making big swings. However, when the swings are shy and low in volume, then we know that the market is taking a break, consolidating, preparing for a reversal or continuation big moves.

We will be looking for areas where RichTL dots come together forming a narrow range.

Notice how RichTL was making big swings before 20 August? Then between 20 August and 5 September RichTL started to make swings/dots giving us an alert that the market is settling down and losing momentum.

It is like you are filling a balloon with water, sooner or later, price will explode by breaking either side.

We want to see at least 3-4 swings/dots before considering it a valid setup and start looking for breakout opportunities. (the more the better)

In the two examples above, we have what we are looking for. RichTL was making big swings, then swings start getting weaker creating a narrow formed with at least 3-4 dots.

After the third RichTL dot, our setup becomes valid, thus we can draw our BOMB zone. (in gray)

Now we know what setups to look for.
How to trade them?


Once we spot a valid RichTL BOMB setup, we look to the left and identify the last swing high and swing low and draw our lines.
Our entry would be a candle close above/below one of the lines.

In the last example, price broke the previous swing low, by a momentum candle closing below it. Thus we could have entered a sell trade in this case.

Our stop loss is on the other side, just above the swing high in this case.

Our take profit would be double the size of the stop loss or the nearest strong support/resistance level.

More Examples? here we go!

Remember: RichTL is not a stand-alone strategy, but can definitely add more confluence for an existing potential setup.

Do not make trading decisions based on RichTL solely; it is always better to have confluence.

NB: Orange Dots are added to RichTL-v2

All Strategies are Good; if Managed Properly!
~Rich

www.theSignalyst.com
www.RichTL.com

How to trade 123 Pattern Objectively

RichTL 123 Pattern

RichTL 123 Pattern is simply an objective 123 Patterns. No second guessing, no pattern forcing, no subjectivity, no… no… no… you got my point!

Before we go over our RichTL 123 Pattern. What is a 123 pattern?

The 1-2-3 pattern is one of the most popular trading patterns. We can say that it is the bottom, a correction, a re-test, and a rebound. The pattern usually occurs at the end of trends and swings, and they are an indication of a change in trend. They can also be found within a trading range, and they take place when the directional momentum of a trend is diminishing

Uptrend:

  • Point 1 is the lowest low point, forms a support level.
  • Point 2 will be the peak, or the highest point, forms a resistance level.
  • Point 3 will be the second low point, a support level (must be higher than point 1 which is the lowest low point)
  • The price breakout above point 2 signals the continuation of the uptrend.

Downtrend:

  • Point 1 becomes the highest peak when price finds resistance and moves down.
  • Point 2 becomes the lowest low point, forms support.
  • Point 3 forms when the price moves up and forms a resistance.
  • The price breakout below point 2 support level indicates that the market is most likely to continue going south in a downtrend.

RichTL 123 Pattern is objective as we will be using RichTL dots to identify our 123 levels.

123 Pattern is a reversal pattern, and just like any pattern it occurs at the end of trends. So only look for such pattern in a trending market, no ranging ones.


Let us get started…

As previously mentioned, before we start looking for pattern, we need to identify a trend.
For example, below we have got a bullish trend on CADCHF as was price making higher highs and higher lows.

Big Impulse movements in purple
Small corrective movements in orange

Then price made a higher low (in blue) but couldn’t make a higher high (in red), forming a 123 pattern as you can see in the picture below.


Here is the pattern again as shown in the first picture


How do we trade this pattern?

We simply draw a line/zone at level 2 and enter on a momentum candle close below it as you can see in the picture above.

Confluence

As I always say, our strategies are not stand-alone systems. Extra confirmation is always needed. The more the confluences, the better.

Let us go over our previous example and check if we have any confluences confirming our setup.

1- Head and Shoulders in orange ellipses
2- Divergence in Purple on MACD
3- Objective trendline in Maroon, which also acts as our Head and Shoulders neckline


Let us go over a bullish 123 Pattern example

Below we have got a bearish trend on CADCHF as price was making lower highs and lower lows.

Big Impulse movements in purple
Small corrective movements in orange

Then price made a higher high (in blue) this time breaking the previous high giving us an early alert that the bulls are gaining strength.
But couldn’t make a lower low (in red), forming a 123 pattern as you can see in the picture below.


Here is the pattern again as shown in the first picture


How do we trade this pattern?

We simply draw a line/zone at level 2 and enter on a momentum candle close above it as you can see in the picture above.

Here we have got a divergence on MACD in purple as a confluence.


More examples:

EURAUD H1

How about confluences? The picture says it all

I can see another 123 pattern here on EURAUD H1


here is one more on USDJPY

how about confluences? The picture says it all



That’s it for our RichTL 123 pattern. Feel free to share your thoughts by leaving a comment.

All Strategies are Good; if Managed Properly!
~Rich

www.theSignalyst.com
www.RichTL.com