2b pattern

i'm not going to invent the wheel but i'm going to perfect it. so this pattern was initially written about by trader vic. i found it at james16 also. it is called pin bar at double top/bottom with divergence. now the thing which i discovered is that we practicaly don't need a pin bar. what does a pin bar represent? a fast reaction to a specific level. that's what i look for: fast reaction to a double bottom/top and also with divergence. there are specific rules which i found out to work best and also exceptions regarding exit rules (this is the beautiful part). first of all let's see some examples. in the attachment you will see the 2b pattern in trader vic's conception and james16's pin bar.

Tools that I use for backtesting : Visual Backtest - better than forextester. https://www.forexfactory.com/showthread.php?t=779303

chart

the first chart is a buob which worked. i take those also but watch this.

chart

chart

now the first part is the entry. first of all we must look for a previous swing point. we must look at the relative size of the bars contained in the pattern and we look at a meaningfull bullish or bearish bar(depending on the double top double bottom situation) which stops in it's evolution around the level of the double bottom/top . in the case of double top we look for a meaningfull bullish bar and if the price comes back and we also have the divergence present we put the sell entry at the bullish bar's low. in the double bottom situation we look for a bearish bar and we place buy orders if the prices comes back to the high of the bearich bar. now remember that we are looking for a rapid reaction to the double top/bottom area. ideally it should be a pin bar. but if we have the bullish or the bearish bar we start counting to 4. this is the magic number. if we do not have an order triggered in 4 bars including the initial bar then we cancel the order.

another more recent example.

Interesting idea..
did i do it right like this?
.

there were similar charts on usd dkk , usd sek, usd jpy, eur usd. besides usd jpy which you could have gotten out with a small 0.25 loss (out of the initial stop loss) all of them made profits.

80% of 2b's reach 0.61 fib expansion. at least 60% of them reach 100 fib expansion.so you take half of the profit at 0.61 and you put your stop at break eveb. now you have 0.3 of the initial stop as a profit. if it goes beyond that and you reach 100 then you exit fully and then you have another 0.5. total is 0.8. it is very important that after the first breakout bar you move your stop at 0.2-0.3 percent of the initial full stop. let's see examples.

now let's take a profit and get out of bad situations. a very important exit rule for this system is a contrarian pin bar. even if it is small you get out.a second bad situation is when you get a signal and after that prices moves sideways with more than 6 small bars. that is what i call indecision and that is where you have to get out.

now let's finish with a happy example of an exit. another 0.8 win of the initial risk. loosing trades are between 20-30 % and the majority of them are 0.2-0.3 percent. so if you win 1 you can afford to lose 2.5 trades. a full loss is a rare case for me.

i am always excited about such simple PA systems. thanks for posting this

some questions/doubts

1.Lets take double top example. we got a breakeout bar, price started going up, we have our stop sell order at low of the breakout bar, the price didnt come back for some time. how long you wait before you delete your order ? is this same for both pinbar, buob/beob ?

2. If the breakout bar is BUOB/BEOB it must happen within 5-6 bars from first top/bottom ? If the breakout bar is pin bar then no such restriction, it can come after a month or year. is that true ?

3. what timeframe is best for this system ? since we are looking for fast reaction, higher TF like Daily , H4 may not be appropraite. I am thinking H1 is good. may be M30 too

4. since this is a manual check, how do you keep scanning so many charts without losing a good trade ? i dont like indicators , but in this case may be a simple indicator will help us. let me see if i can write something real quick

5. is divergence must ? in some charts, i dont see divergence panel. what happens if we get a nice pin bar at good location, but divergence is not there, still we pick the trade ? divergence can be on macd or rsi or stochs ?

6. i like your exit rules using fib expansion. but its little complicated in real time. to keep moving stops and booking profits. if i put my tp at next SR line, is that fine ? may be move stops to BE quickly

1. we wait for 4 bars including the breakout. for the pin bar and the bb i the sell should be imediatly on the next candle.
2. i like to see pinbars and bb of good size and not so far apart from the previsious top.
3. 30m, 1h 2h, 3h, 4h....and so on. the principle stays the same. i had a week in which i found many 2b on different time frames. i think that if you monitor 15 pairs(you have to have small spreads for to work) on all the timeframes>30m you will find 4-5 of these.
4. i use h1 and i check my charts every hour 5 min before the close. but you can do this by puting an alarm in metatrader right around the previsious swing high /low and you will be warned about a possible 2b setup.
5. divergence is a must.i use only standard macd. usually at double x situations you will have divergence. but don't trade them if they are small compaired with the preceding bars. i haven't backtested rsi or stoch.
6. i don't understand why is it complicated. the thing with this exit is that you will no longer worry about the first trouble area.many times it goes beyond that to the 61 percent. if your order gets filled you can set up an alarm around that level. if you're on 30 min all you have to do is wait for the next candle and put your stop under it and set up an alert when price will get to 61. if you get to 61 take profit there (half...you can do this in metatrader by opening 2 positions in the begining), put the remaining position at break even and set up the take profit for that one at 100.


if you want to succede you must first backtest all that you can find. if you will become succesfull on backtest with this you will be succesful in demo and after that in real time. the problem with pattern is that it is not so often. let me kow how the backtest works. i use h1 on fxpro. on h1 it goes back to 2006 on many pairs.

thanks deltatrade for the quick response

i will post some charts as i find them

chart

entered on break of the pin to the upside. marked as blue rectangle. right now in loss, it just missed the 61 etxn by 2 pips

the problem with that pin bar is that it is small compaired with the previsious bar. my feed doesn't show any pinbar. on your feed did it have divergence?

yes theres divergence on macd. i agree the pin bar is tiny compared to the prev bars

the order did not get triggered.