Technical Patterns 101: Simplicity at its Finest

“Everything should be made as simple as possible, but not simpler.”

That’s according to Albert Einstein.

Applied to trading, it simply tells us simplicity is key. 

Then again, if you really want to make things harder on yourself, more power to you.  But what if I told you there’s a system so simple, even a 10-year-old can understand it?  Better yet, you can apply it to any stock, currency, or index.

Most times, we’re just waiting for exhaustion among the bears and attacking, long before the herd wakes up to the reversal, if at all.  One way to spot exhaustion is by paying close attention to momentum indicators, such as relative strength (RSI), MACD, Money Flow (MFI) and Williams’ %R (W%R).


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We’ll apply it to the US Dollar and Gold right now using a one-year chart.

With gold, we can always draw our trend lines and notice the rising consolidation pattern.  But take a look at what happens when the bears get exhausted at four different bottoms dating back to October 2016. Gold bounces.

It doesn’t matter what else is happening in the world.  The second the same set up occurs, gold moves higher.  Imagine spotting exhaustion four times in a year on the same stock.  Easy wins each time.

Each time the bears took control, they tired themselves out not long after.  All we have to do is watch for RSI to dip to or below its 30-line confirmed with a dip in MACD, confirmed with a move to or below the 80-line on Williams’. 

That’s simplicity at its best.

We can even spot exhaustion among the bears and bulls using a one-year chart of the dollar.  Staring out, we can easily see the falling wedge pattern persisted from January 2017 to May 2017.  In fact, it maintained the pattern for months.

But the other confirming tools were our technical points.

When the bulls are pooped, RSI is at or above its 70-line, confirmed with a spike in MACD, confirmed with a move to or above 20 on Williams %R.  Reverse them and you can spot bottoms on the currency, too.

Again, if you want to use a system that not even you full understand, more power to you.  If you want to make money quick and easy, though, try this.  It’s a system 20 years in the making with up to 80% success.


Learn to Trade the Markets from Veteran Traders. Apply What
You've Learned and Get Paid To Trade! Learn How Here