Traders roundtable: explaining the Continuation pattern
A continuation pattern requires a “successful” previous trade.
Each of the original patterns: WO, TS, 5DD, maxpain: all are probabalistic hypotheses; we ventured into the trade on the possibility it may reward our risk;
The success of the first pattern gives us reason to believe (in the form of evidence!) that the target is moving in our favored direction; the Continuation pattern, then, simply is a way to frame a new trade on the same target, providing:
1. we can still see a 2:1 reward:risk ratio, using the most recent swing high (it may have made a new swing high on the last cycle)
2. The pullback which caused us to exit the trade did not create a new swing low.
3. we use the Universal Entry (UE) to get in: .05 over yesterday’s High
I used to mean that I had cashed a winning trade, but now I am content to have the pattern work whether I was in it or not.
I may not have been able to take the trade for any number of reasons and I decided I should not let that keep me out of the continuation trade