Trading Dragon Pattern

Dragon Pattern Trading

Trading Dragon Pattern

■ "Second leg" (can be 0.618 to 1.27 of AB).

■ Trend line "breakout" (Long Trigger).

■ Second "target" at 0.886 to 1.0 of BC.

STOP: Place a stop few ticks below the lowest low of two legs.

Trading Dragon Pattern

Trading Dragon Pattern

The example above shows a "Dragon" pattern formation from the Dow Emini futures 30 minute chart. On January 3, 2007, Dow futures formed the head of the "Dragon." Prices declined until January 8th in the first leg formation. On January 8th, prices tried to recover as they rallied to 12520. A trend line is drawn connecting the "top" of the "head" and "top" of the first leg. On January 10th, the second leg was formed as prices retraced from the hump area to 12420. A confirmation of "Dragon" is first signaled when prices closed above the trend line at 12500.

1. Enter a "long" trade at 12,520 (close above the high of the breakout bar).

2. Target the first "swing high" prior to leg (1) at 12,570 and "head" area at 12,640. _3. Place a "stop" order below the lowest low of the two legs at 12,410._

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