To make consistent profits, candlestick patterns are what you need to use. If you want your profits to explode, you must know how to use candlestick patterns. That is why in this article I introduce to you the Rounding Top pattern that brings great profits to traders every time it appears.
What is the Rounding Top pattern?
The Rounding Top is a pattern consisting of many consecutive candles creating an arch. Two relatively equal side domes form a clear support level. If the price breaks through that level, the price will likely drop very strongly. It usually forms at the end of an extended uptrend and this price pattern represents a long-term bullish-to-bearish price reversal.
Rounding Top pattern features
The Rounding Top pattern has the following key elements.
– Bullish rally: The first part of the pattern is a bull run.
– Peak: The highest area of the top of the pattern is not too sharp and it doesn’t take a long time to form.
– After that, a drop is formed to the right of the pattern. This phase takes the same amount of time as the bullish rally on the left of the pattern. If this drop is too fast, the effectiveness of the pattern may not high.
– Breakout: Downtrend confirmation occurs when there is a breakout below the support level, marking the beginning of an upcoming downtrend. After a breakout occurs, the price zone at the breakout point becomes a new resistance zone.
– Volume is low at the start of the rally on the left and high at the end of the rally. At the same time, there is a strong increase in volume on the right of the pattern.
Rounding Top trading strategy
For the Rounding Top price pattern, we are only allowed to open bearish orders. Besides, to improve the probability of winning, we need to pay attention to the trading volume. If the end of this pattern has a large volume of trading, the breakout has a high probability of success. We can enter an order as soon as the price closes the candle below the support level.
On the contrary, the end of the Rounding Top pattern has low volume so we should continue to observe. Wait for the price to break the support level and retest the level it just passed then start entering orders.
The stop loss will be placed at the nearest high and the take profit will be 2 times the distance measured from the support level to the highest high of the Rounding Top pattern as shown above.
Conclusion
Like other patterns, to have the highest accuracy in the Rounding Top pattern, it is advisable to combine other technical indicators and pay attention to the trading volume. Keep in mind that successful breakouts are often extremely high in volume. If the trading volume is small, it may be a trap of the market.
So to have the best judgment, you should practice a lot on the Demo account. Wish you make a lot of profit with this special pattern.
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