How to Spot a Failing Pattern

04/16/2012 12:43 pm EST


Revisiting real E-mini futures market action, the staff at shows how to spot signals that a pattern is failing and effectively respond so as to stay on the proper side of the changing market conditions.

Just as recognizing market behavioral patterns is important, recognizing and accepting the failure of patterns can be vital to your success. When a market fails to do something, the reversal is often at least as powerful, if not more so.

If you think about it for a minute, it makes sense. If a lot of traders have the same position and all of a sudden the market starts to reverse, there are not only those who want to go with it, but also a bunch of traders who want to exit.

If you hold a position and the market falters, then it's very useful to be able to identify this swiftly. One, you protect your profits, and two, you potentially can jump onboard for a reversal.

In the video below, you'll see an example in the S&P 500 E-mini futures (ES) from Thursday, March 29, 2012. The ES looked in some respects like it should continue to sell off. Had you been short, it would have been useful to spot the signs that the move lower might be over.

Watch the video here:

By the Staff at

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