Diving Board Model Although quite rare but once they appear, this is an opportunity for you to make money in the forex market, when providing signals for a Buy (Buy) after a sharp decline. But also because this is a rare model, you need to observe the market and find the right entry point. The following article not only helps you know how to identify the Diving Board model on the chart, but also understands the most effective way to trade.
What is the Diving Board?
The Diving Board is a classic price model characterized by a sudden dive down and then a rebound, taking place after a period of cumulative price movement earlier. This model has an image similar to a diving athlete so it is called Diving Board.
Features of Diving Board
Diving Board model includes the following 3 components:
- The first part is the "Diving Board" (Diving Board). This is a flat range, also known as accumulation. Note that this zone must have a support line running through the cumulative period of the price, that is, each time the price touches this line must pop up as shown below.
- The second part is "The plunge". This is a sudden movement of prices in the direction of a sharp decline to below, breaking the support line mentioned above.
- The third part is "The recovery" (The recovery). After a dive, the price began to change direction upwards.
Actual example of Diving Board model
Below is an example of the Diving Board model. The Diving Board model was created on the MARUTI stock chart on the weekly time frame (W1). Starting in October 2018, the price has moved in an area of accumulation and created a solid support line below. This support level was broken at the end of June 2019 and created a "jump". Then, by early August 2019, prices recovered and increased towards the initial accumulation area, the model is complete. It can be seen that the time to create this model is quite long, but if you seize the opportunity, you have a fairly profitable amount in a short time.
Instruction for trading with Diving Board model
Entry point command
For the Diving Board model, we will seize the opportunity when the recovery price goes up. Specifically, after the market breaks down creating a "demand jump", we will wait for the price to create a bottom to enter the buy order. The bottom here is the candle with lower price than the front candle and the back candle as shown below.
After the bottom appears, we will enter the command at the next candle.
How to set a stop loss
How to set a stop loss (stop loss) is very important. If placed too far, the risk will be large, but if placed close, it is very easy to touch. Therefore, we will set a stop loss right at the bottom of the newly formed bottom.
How to set profit taking
In theory, the support will turn into resistance after being broken. Therefore, we can set profit taking points at the support line in the previous accumulation area.
However, this approach does not bring much profit. So you can continue holding the position until the signal of reversal or when the uptrend is weakening.
Diving Board is a classic price pattern for buying signals. To be more effective when trading on this model, you can combine other analysis and always remember to set a reasonable stop loss and take profit. Hopefully through this article, you already know how to identify and effectively use the Diving Board pricing model. Good luck!
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Author: Tin Nguyen
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