Trading Inverse Dragon Pattern

Legs

Inverse Dragon

Hump

Target

Head

Source: TradeStation

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Trading Inverse Dragon Pattern

The "Inverse Dragon" is an upside down "Dragon" pattern and its trading rules are similar to "Dragon" rules. The "Inverse Dragon" is a rare, but a very reliable pattern. The "Dragon" pattern starts with a "head," "hump" and two "legs" (inverse). The hump area is usually at 38% to 50% of the range between the "head" and the first "leg." A "close" below the trend line triggers the first "short" trade. A "close" below the "hump" line to trigger another "short" trade.

1. Enter a "short" trade below the trend line.

2. Target the "swing low" prior to the first "leg."

3. Place a "stop" order above the highest high of the two legs.

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