Upthrust and Spring are two extremely effective trading methods of traders in the financial market. It was almost a hundred years old when everything was still in its infancy. The article below helps you understand Upthrust and Spring, and how to use them to make profits every day.
Upthrust and Spring definition
Upthrust and Spring are false breakouts at a certain support or resistance zone. These false breakouts “trap” traders who love breakout trading style into rapid losses. The price, after moving in one direction at the beginning, will usually move in the opposite direction towards the end of the trading session. This makes traders who were following the previous trend stuck
Spring is the name for a false breakout below a support zone. That is, the price goes down first, then bounces up, which makes traders who place Sell orders stuck in a losing position.
Upthrust is the name for a false breakout above a resistance zone. It means that the price goes up first, then comes back down, making traders who opened a Buy order stuck.
Effective trading method with Upthrust and Spring
Upthrust and Spring is a trading method used by legendary trader Richard Wyckoff, who has many great trading theories taught as a basic course for traders around the world.
The quality depends on a few things:
- The level of the “trap”, i.e. the length of the false break candle shadow
- Hardness of resistance/support where Upthrust/Spring occurs
- Trading volume of Upthrust/Spring generated session
There are several possible scenarios when combining Upthrust/Spring and the trading volume of the session
- Big shadow and high volume
- Big shadow and small volume
- Small shadow and high volume
- Small shadow and small volume
In the above cases, priority is given to long shadows and high volume => more people are trapped and have to exit. This leads to a push in the opposite direction (sellers who are stuck must exit and have to buy, creating a push-down force).
How to set stop loss and take profit effectively
For the stop loss, we will do the following:
- Stop Loss can be placed at the bottom of Spring for BUY orders
- Stop Loss can be placed on top of Upthrust for SELL orders
What about the take profit point? Which point is reasonable to have high profits without creating greed in traders? You can set take profit at the nearest peak of Spring for BUY orders. On the contrary, you will place take profit at the nearest bottom of the Upthrust for SELL orders.
Usually, most traders choose to trade when they see an opportunity. And for this method, we will look for the traps of the market. When most people have realized their mistake and got out of the position, this is the opportunity we’re waiting for.
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