Spike and Ledge Pattern

The "Spike and Ledge" pattern was first defined by Larry Connors and Linda Raschke in the book, Street Smarts. As the name suggests, markets make a "climax high" or "climax low" (New High or New Low) spikes followed by a resting point or "ledge" then a reversal of the prior trend.

A "Ledge" pattern is defined as a series of bars with matching lows and highs within a certain number of bars, namely 20. Usually "ledge" patterns are considered as a resting point before markets pick a clear direction, which is mostly a reversal of the current major trend. Ledge patterns are effective in all time-frames but they are more effective during intra-day trading.

Trade: Set a trade entry at the "breakout" or "breakdown" from the "Ledge" formation. Wait for a clear breakdown or breakout and enter at the low (or high) of this bar.

Stop: Place a "stop" order on the opposite side of the "Ledge" pattern. For long trades, place a "stop" order below the low of the "Ledge" pattern. For "short" trades, place a "stop" order above the high of the "Ledge" pattern.


Usual targets would be the prior "major swing high" for long trades or prior "major swing low" for short trades from the "breakdown" or "breakout" levels. If markets experience a "gap" prior to the "Spike" formation, targets after a breakdown/breakout from the "Ledge" pattern would be the "gap" levels. Otherwise, the target would be a prior "swing low" or prior "swing high" before the "Spike" formation.

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