Round Bottom Pattern

"Round Bottom" patterns are also called "saucers" and they form at the market bottoms. "Round bottoms" form after a prolonged down-trend, slow and gradual markets. "Round bottoms" are relatively reliable patterns and are easy to spot (in curve form) at the bottom and have weak volume markets. "Round bottom" trading is similar to a "rectangle" pattern trading and they may be better visible in higher time-frames. A trend line is drawn connecting the "swing highs" of the "round bottom" pattern to initiate the trades at the trend line breakout levels. "Round bottom" patterns with a long base may provide more profitable trades.

Trade: A trend line is drawn connecting previous "swing highs" prior to the "Round bottom." Price trading above the trend line signals a breakout and a "long" trade. Enter a "long" trade above the high of the breakout bar from the trend line.

Target: Two potential trade targets are possible in "Round bottom" patterns. The first target is the depth of the "Round bottom" pattern from the breakout level. The second target is the previous "major swing highs".

Stop: The "Round bottom" pattern trade is based on the trend line breakout. Pattern failure can occur if the market closes below the trend line for a series of bars. Place a "stop" order below the trend line to protect the trade.

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