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hello.
I have been thinking, after a nice meaningful spike, we get a pullback (say to the 10 or 20 ema). It is high probability that the trend will resume (as a channel).
The second pullback, also high prob.
Isnt the 3rd PB of lower probability? and the 4th and 5th even lower?
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or, imagine the end of a trend, the TL breaks, price action bounces off the previous low, and we get a double top. This could be a range, I'm preparing to buy the lows of the box, I consider this relatively high probability that the highs will be retested. But, after this occurs a couple of times, isn't it now low probability that the box will keep on giving? Should we only consider the 2nd or 3rd bounces in a range and then regard the rest as lower probability?
thanks for your attention, happy trading!
Hi aristides,
I think it's important to get a little more specific with what "high probability" refers to other than just trend resumption. For example, it's a high probability of there to be a 2nd leg attempt after a PB from a BO spike and >60% chance to reach MM of BO or maybe MM leg1=leg2.
But in general I do agree, if the trend isn't resuming and starting to get H3,4,5 and so on at about same price level, then it's converting into a trading range. Soon there will be a wedge. And as the range keeps going for a long time, the probability of whether the BO will be bull or bear reduces closer to 50/50.
If you have some screenshots based on these ideas please share, it's always helpful to see some specific examples.
Cheers,
CH
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