When trading at a high point rather than a low, then the pattern makes a 'M' pattern instead. So if we are going to trade up, and we spot a bearish dragon pattern looking like it will reverse. So because of the nature of this set-up giving traders a double bottom, we get excellent opportunity to get into the start of the 'Head' formation, as price steadily declines from the previous swing.
This retracement, turns into another swing low, and at this point we can consider that this is a dragon formation. People also simply refer to this harmonic pattern as a double bottom reversal pattern. Learn to trade harmonic pattern FX! This second swing low, is where traders should be looking to enter into the trade. What usually happens is a spike in the volume increases.
Questions: Most people ask these questions when searching for information about this pattern. Does trading chart patterns work? What is Dragon trade? What is the best stock chart pattern? Upon entering into the trade, you should draw a trend line, connecting the head to the middle swing high, at the hump level. Wait until the second leg is done. This should be your confirmation when price goes above and closes above the trend-line.
One reason why this is such a good pattern to trade, is because it provides a risk to reward ratio that is good. It is a excellent pattern for trading. The author says there can be candlestick reversal combinations or divergences on technical indicators that can give additional signals to open a position.
The opinion of traders regarding the Right Paw differ: some say that the pattern works better when it is below the Left one, while others say that position slightly above the Left Paw is more efficient. The price movement from the Right Paw upwards is called the Tail. There the trader must find the points of taking the profit by the pattern.
Now to the bearish version of the Dragon. This one looks very much like a Double Top. Let us take a closer look at it the structure:. In a bearish market, the Dragon also starts to form at the Head point. This is the first movement from the local low to the top of the pattern, from where the decline will begin later. The the price continues to fall, yet within the Fibo correction of This is where the Back of the Dragon should form.
The Right Paw should form here. Start looking for aggressive entry points but wait for some confirmations if you are used to more conservative trading. Then a downward movement is to follow, the so-called Tail of the Dragon. There we find the points for taking the profit from selling by the pattern. In their first works, the author suggested looking for opening signals on the Right Paw but later only breakaways of trend lines were regarded as strong entry signals.
However, a huge advantage of opening a position when the second paw is forming is its tiny risk compared to potential profit. So, aggressive traders can use this chance to open positions with a minimal Stop Loss. Draw the trendline from the Head through the Back of the Dragon. As soon as the price closes above such a line, and there is, for example, a divergence on the MACD , this will be the second signal to open your position by the pattern.
The third opening signal is a breakaway of the Back of the pattern that lies between Here the trader expects a breakaway of the horizontal level. The signal is quite similar to the classic Double Top and Double Bottom pattern. In the classical W-shaped and M-shape, we take the height of the pattern to set the goal.
The Dragon uses Fibonacci levels to set goals for taking the profit. You can place the Take Profit on one of the three levels of correction:. As a rule, this point coincides with the Head level. The third goal, the most optimistic one, is between 1. The Stop Loss for this pattern is placed below the low of one of the Paws. Simply speaking, place the SL below the low of the bullish pattern or above the high of the bearish pattern. As we see, there is a bearish Dragon pattern forming, we already have the Left Paw and Back.
We can looks for a signal to sell right now because the Right Paw of the pattern is falling, and this is an aggressive place for the first trade. Place a Stop Loss above 1. Then we can suppose that a breakaway of the ascending trendline will happy at 1.
A breakaway of the Back will happen at 1. Take the first profit when the price tests 1. The second one — at 1. The Dragon pattern is an improved version of classical reversal patterns that can easily be found on the chart by Fibo. The author provides us with entry points and more exit options. In classic patterns, there is only one goal and one opening point. Trading by the Dragon, the trader gets three entry points, from an aggressive to a more careful one, as well as three exit options with different profit sizes.
The pattern works well on various timeframes. The best option will be looking for the pattern by the trend. Financial analyst and successful trader; in his practice, prefers highly volatile instruments. Delivers daily webinars on trading and designs RoboForex educational materials. It is high time to look around while there are not much statistics around. The pair can be traded by fundamental or tech analysis and with the help of indicators.
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Every week, we will send you useful information from the world of finance and investing. We never spam! Check our Security Policy to know more. Try Free Demo. How to Trade Dragon Pattern: Manual. Contents Structure of a bullish Dragon Structure of the bearish Dragon pattern Where to open a position by the Dragon pattern? How to set goals by the Dragon? Where to place a Stop Loss? Example of opening a position by the Dragon Bottom line. An example of a forming Dragon The Dragon pattern looks very much like a Double Bottom but features some unique rules that identity it as a separate pattern, not a classical price structure.
Structure of a bullish Dragon Let me inform you from the start that there is a pattern that forms at the bottom of the market, giving a signal to buy, and a pattern at the top of the market that suggests selling. Look at its structure in more detail: For the bearish market, the Dragon starts forming in a point called the Head. The beginning of a decline — the Head of the Dragon pattern As soon as the price reaches the low and pushes off it upwards, the point turns into the Left Paw of the pattern.
The Left Paw of the Dragon pattern The the price bounces upwards but fails to break through The Back of the pattern must be between Upwards movement is called the Tail of the Dragon Structure of the bearish Dragon pattern Now to the bearish version of the Dragon.
These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may have an effect on your browsing experience. Is it possible to try it. I thank you phdevezeaud gmail. Please send me the indicator.
Paolo Tuesday, 30 October May I have the indicator? If yes, thank you very much! Ayanda Monday, 20 May Adekanye Thursday, 13 June Please send me the indicator at timoadek yahoo. Ichi Bokou Sunday, 04 August Guys there are no indicators for that pattern ,you just have to identifie that pattern by yourself but it can easily be find in H4 to M15 did not go on lower TF!
Please Saturday, 16 November Victor Sunday, 29 December Jose Saturday, 11 January Sunil Monday, 20 January If I make money with this indicator, I will regularly donate some of my earnings to you every month. I say this with all my sincerity. Tiger Lamont Wednesday, 12 February Please send me anatomy of dragon indicator Bafanajunior gmail.
Muuhanga Lazarus Saturday, 14 March Craigen Wednesday, 18 March Kflodrick gmail. Samuel Thursday, 02 April Kishor Sunday, 17 May Mishuk Sharma Wednesday, 20 May Isaac Thursday, 11 June Tom Sunday, 26 July Its very interesding formation. Where can I get an indicator showing the formation being formed?
My email: onetom vp. Franck Sunday, 26 July Wasiu Saturday, 08 May The second leg has a strong indication of reversal as it posts a key reversal bar or a divergence in any oscillator indicators. Anatomy of a Dragon Pattern A. Head of the Dragon B. Formation of first leg C. Hump must be 0. Second leg can be 0.
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