I’ll give that a try in my backtesting and see which one is more profitable! 
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@jseymour84 I’m quite liking your thinking on this, although I’m struggling to understand why you’re allowing such a big margin to the second “Top” - 13% of the whole impulse to the first top ?
I think you might be misunderstanding, let me see if a chart can clear it up for you.
In this chart, the red diagonal line shows what I consider to be the preceding leg leading into the double top. Essentially it’s the move that goes from the lowest low to the first top. The trigger bar defines the area where the double top will complete. For the double top to be valid, the high of the completion bar must exceed the close of the trigger bar, but the close of the completion bar must be lower than the close of the trigger bar. Enter at market once the trigger bar closes.
Another element that I need to see is bearish divergence in the RSI indicator. The RSI of the trigger bar must be higher than the RSI of the completion bar. I don’t have any specific rules on the values of the RSI, just as long as it is in a downward move while price retests the close of the first top.
The top in this chart isn’t the cleanest as it just touches the close of the trigger bar, but it is still a valid pattern that I would trade in my plan. The stop loss is at the 113% Fibonacci extension of the prior leg because if price reaches that it is not going to reverse. The first target is at the 38.2% retracement level which in most cases lines up with previous support (especially in this case). Once price action hits this level, you can roll your stop loss to your entry price. If the market continues update at that point, you break even on target 2 and make some pips profit on target 1.
The way I implement this is simple. If I am trading mini lots, then I trade 2 mini lots. One mini lot comes off at target 1, stops roll to break even, and I still have 1 mini lot riding risk-free to target 2.
Does this help?
Yes that helps, thanks you did not mean the whole impulse leg, just the short swing before the Target bar.
So I make those levels 1.2092 and 1.1838, so 254 pips plus 13% = 33 gives a stop at 1.287. Now the completion bar closes at 1.1894 which gives a stop loss initiated at 192 pips ?
Total profit target 735.81 - so nearly 4-1 if it works out. (All these figures are PIPs not money.)
Now the “But” which refers specifically to the current daily chart of the EURUSD. without any reference to any bar After your “Completion Bar” - how do you justify calling the=at a “Double top” sufficient that you would enter a down trade with a 192 pip stop loss - as far as I can see, up until the point where you say you enter the trade, it has been making constistently higher highs and higher lows. How would you tell your computer to look at that pattern as a “Double top” ?
Not trying to be difficult, but I think you may need to look at some of those “trades” of yours again. As you say there may be an element of Confirmation bias creeping in here. A double top to me would need quite a pullback from the first top and a retest, certainly enough to alert us that “something is happening”
Just out of interest, I’m calling the current position a retracement in the trend and a double bottom, although it could turn out to be a “Head and shoulders” equally easily ! 
If it is, you may be right we’ll see 
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Not sure you are calculating that correctly. Your platform should have a Fibonacci extension tool and to draw that 113% level you activate that tool, and click on the bottom of the diagonal red line that I drew, click on the top, and then again back at the bottom and that will plot your stop loss. My trade rules put the stop loss at 1.22897 (or 1.2290 if you round to the nearest pip).
Entry is at the open of the bar after the completion bar closes. In this case that is 1.19472 (or 1.1947) or where the candle immediately after the completion candle opens. The market has moved away from the entry so this isn’t a current trade - it was just a good example to illustrate the rules.
Target 1 is at 1.14254 and target 2 is at 1.10237. Pips from entry to target 1 are 512 pips and pips from entry to target 2 are 924 pips. Pips from entry to stop loss are 343 pips. T1 has a reward to risk ratio of 1.49 and target 2 has a reward to risk ratio of 4.18.
I can see where you think there is another double top forming but it has a downward leg prior to it. That is not a valid pattern in my rules because I require the bullish impulse leg prior to the formation of the pattern. Now there is a potential for a double bottom to form based on the 10/06/2017 bar being the trigger bar. If price action comes down to retest the low of that bar and puts in an RSI value > 50 then we would have a valid double bottom. It would be a small trade as the leg (from the double top trigger bar to the 10/06/17 low) prior to the pattern is a very short leg.
My rules for a double top/bottom only require a high, followed by a lower low, followed by a rest of that high at the end of an impulse/anchor leg (bullish for double top, bearish for double bottom). That pattern could take place in three candlesticks or 15 candlesticks - that doesn’t matter to me. As long as one bar closes below the low of the trigger bar, then price comes back up to test the zone between the high and the close of the trigger without closing above the close of the trigger bar, then it’s valid.
Edit: I think I might have misunderstood your post. If you look at the 9/8/17 bar you see the high at 1.2092 and the close at 1.2040. The completion bar on 9/20/17 hits the 1.2040 with its high, that is why that is a valid double top pattern according to my rules. The high of the completion bar must touch or exceed the close of the trigger bar, and the close of the completion bar must not touch or exceed the close of the trigger bar.
Also, I just noticed where I drew the impulse leg from formed a double bottom with bullish RSI divergence. Trigger bar is 12/19/16 and completion bar is 12/28/2016. That trade would have been a pain free two target trade with the big bullish impulse leg right after that pattern.
I just might have to backtest the daily charts for this strategy for when I get some good capital built up to withstand the large swings.
After a brief exchange about my trading plan, I figured it would be a good time to summarize my current strategy and provide my entry rules.
Short Entry
- If the market puts in a bullish impulse leg, then look for price to pull back from the highest high of the impulse leg.
- If the price pulls back from the highest high of the impulse leg, then look for one candlestick to close below the low of the highest high.
- If the market gives a candlestick that closes below the low of the highest high, then look for a candlestick whose high meets or exceeds the close of the highest high but does not close above the close of the highest high.
- If the market tests the close of the highest high and closes below it, then look for bearish RSI divergence from the highest high to the completion bar
- If there is bearish RSI divergence, then enter short at open of next bar
Long Entry
- If the market puts in a bearish impulse leg, then look for price to pull back from the lowest low of the impulse leg.
- If the price pulls back from the lowest low of the impulse leg, then look for one candlestick to close above the high of the lowest low.
- If the market gives a candlestick that closes above the high of the lowest low, then look for a candlestick whose low meets or exceeds the close of the lowest low but does not close below the close of the lowest low.
- If the market tests the close of the lowest low and closes above it, then look for bullish RSI divergence from the lowest low to the completion bar
- If there is bullish RSI divergence, then enter long at open of next bar
Profit targets are at 38.2% and 61.8% retracements of the impulse leg with the stop loss at the 113% extension of the impulse leg. The idea behind this system is to catch price reversals by looking for where resistance or support is holding and for the price to bounce off of that level.
I think we shall just have to disagree about what properties a “Double top” must have at the hard right edge. Having said that, under the right conditions, I think your system has some merit
I would suggest though that you start paper trading it now rather than waiting. Many of the systems I came up with and later my friend came up with, were great on historical examination but failed completely at the hard right edge. If you have ideas, that is what your pretend accounts are for imo.
I think we need change disagree to civilly disagree. It’s such an odd occurrence on the Internet that we must call it out.
I have been watching my demo account for trade setups while I backtest and I have been noticing around a 60% win rate. The more I think about my rules for entry the more I can see how it would appear to be a leap of faith to enter the trade just because there is a double top or bottom with RSI divergence. That’s why I am testing against historical data and demo trading - mainly to build my confidence in the trade rules.
Go Real, but demo - that will tell you in a few days, whether you’re on the right track
{Edit - in honesty, Whether you wish to call it “civilly disagree” or just “Disagree” is just a matter of political correctness. - in my day we could swear and shout at each other and at the ringing of the bell “Lunch time” - either i would buy you lunch, or you me, depending on who’se turn it was.
Times change, but I hold no animosity - I just disagree 
lol - in my days, a quick fist fight settled most arguments 
I just took a demo trade on GBPUSD 60 Min chart using my entry rules.
We’ll see how this plays out - my backtesting estimates chances of hitting target 1 at around 70%.
Edit: I seriously need to learn how to enter one cancels other orders on NinjaTrader - if the free version can even do it.
That’s great - but where’s th double bottom ?
You don’t need both patterns to trade - it’s one or the other. In this trade, I am taking the double top that is at market right now on the GPBUSD pair.
Zoomed into that chart - Brave to publish that trade at this stage -
Why brave? If I am wrong, then I am wrong - it’s not going to hurt my pride any. I’ve been wrong a lot in my life and it doesn’t show any signs of stopping any time soon
Because if there are any signs on that chart that anything has changed - there’s a big adjustment in many of our tought processes .
In my trade plan, I have very strict rules about adjusting my stops and targets. Essentially, once I am in the trade, I am in until I get stopped out or hit targets. If the market changes mid-trade, then I either get stopped out or ride it out until targets are hit.
None of us can predict the future which is another reason I spend a lot of time testing strategies on historical data and forward testing them in demo accounts. If I have a system that produces a 67% win rate over thousands of trades then I know I can make money and I want to take as many trades as my system allows. I look very long-term. One trade doesn’t even register on my emotional radar.
That’s lovely 
Just a quick morning update before work:
The demo trade I entered on the GBPUSD is moving 23 pips in my direction. It still has a long way to go to the first target, and it’s not looking like its going to be a pain-free ride. My rules are clear though so I have to let the trade run until it stops or hits the first target. Once it hits the first target, my stops will move to my entry price so that the rest of the trade is risk-free.
Hey gang!
Today is Wednesday, which means it’s skill development day for me. I am constantly being drawn to the simplicity (and endless confusion) of pure price action trades. I think one of the reasons I am drawn to it is because it’s a universal concept - if you have chart price action, you can trade it. I know another reason I am drawn to it is because I have yet to get a good grasp on it and I hate to let anything beat me
Here is a chart I marked up with what I think are support (green) and resistance (red) zones.
Something I read a lot about is to not enter a trade just because we are at a support or resistance level, but to look for confirmation. Everything I know to look at for confirmation (indicators, candlestick patterns) I am told isn’t price action.
I have GBPUSD at a resistance zone right now - how would you more experienced traders look for confirmation before getting involved? Or would you not get involved here?
I know @cndlstckchic has some good stuff posted here, so I will be going back over that when I get done at the gym tonight. I am still going to proceed with my double top / bottom strategy but I am also looking to learn a pure price action strategy.
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