Exhaustion Trend Trading Pattern

Exhaustion Trend Trading Pattern

The Exhaustion Trend Trading Pattern looks to take advantage of the 1st trading pattern after the exhaustion pattern has signaled a top or bottom.  Typical retail traders see the small retracement after a large move as an opportunity to try and trade with the trend.  Unfortunately for them, profit taking and trend reversal will cause them to lose money.  The pattern involves a low risk stop usually 4 ticks or less.

Exhaustion Trend Trading Pattern
Exhaustion Trend Trading Pattern

Tick Divergence Exhaustion Trading Pattern

A very nice pattern occurs when TICK divergence occurs at the exhaustion trading pattern preceding the exhaustion trend trading pattern.  In the below picture we see the market in a strong bullish trend and the exhaustion trading pattern marking the top.  We see tick divergence at the top, followed by a lower tick low leading into the exhaustion trend trading pattern.  At the Exhaustion Trend trading pattern we have a lower low TICK and a lower high TICK at the area of the trade.  There is also Euro divergence at the trade.  ZoneTraderPro is always looking at the status of the dollar to determine if there is a divergence that would assist the current trade.

While not shown on the chart, the Exhaustion trade risked just 4 ticks and 2 points of profit. The exhaustion trend trading pattern had just 3 ticks of risk and 10 ticks of profit.

Tick Divergence Exhaustion Trading Pattern
Tick Divergence Exhaustion Trading Pattern

 

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