Golden Point Indicator

13. Aug. 2023

The Spring Strategy, a well-regarded technique, is employed by skilled traders to detect potential shifts in market trends. This methodology is particularly effective in identifying instances where prices appear to breach critical support or resistance levels, only to dramatically rebound in the opposite direction, creating what is known as a "spring" pattern or a false breakout. This distinctive pattern serves as a harbinger of diminishing trend momentum and an imminent reversal in market direction.

In a bearish market context, the Spring Strategy materializes when an asset's price plunges below a vital support level. This prompts a wave of selling activity as traders react, leading to a further decline in price. However, this selling pressure eventually subsides, and the price experiences a sharp recovery, springing back above the support level. This resurgence presents a compelling opportunity for traders to enter the market at a more favorable price point.

Conversely, during bullish market conditions, the Spring Strategy is observed when an asset's price surges beyond a significant resistance level. This stimulates widespread buying interest among traders, propelling the price even higher. Nevertheless, this buying fervor abates, and the price retraces, springing back below the resistance level. This dip creates an advantageous selling opportunity, enabling traders to short the market with a potentially favorable risk-reward profile.

How to use or benefit from script:
For Long position :
Add script to chart for any time frame. script will calculate and look for any candle with fake break out. When detected it will wait until detecting a new candle closing higher than the high of fake break out candle. a buy alert is sent and shown. So traders can go long and specify risk / reward target.

For short position :
Add script to chart for any time frame. script will calculate and look for any candle with fake break out. When detected it will wait until detecting a new candle closing lower than the low of fake break out candle. a sell alert is sent and shown. So traders can go short and specify risk / reward target.

Advantages of Embracing the Spring Strategy

The Spring Strategy bestows traders with the advantage of identifying potential buying and selling scenarios while mitigating associated risks. By strategically awaiting the "spring back" to the initial breakout level, traders can avoid premature market entry and thereby reduce the likelihood of incurring losses.

Application and Implementation

Traders adeptly harness the Spring Strategy to decipher impending reversals. Should this pattern manifest following an uptrend, traders may opt to exit their long positions or initiate short positions, anticipating a transition towards a downtrend. Conversely, if the Spring Strategy unfolds post a downtrend, traders might liquidate their short positions or embark on long positions, foretelling an eventual shift to an uptrend.

Deconstructing the Consolidation Strategy

To begin, traders should pinpoint a period marked by price consolidation or a trading range. Within this phase, prices oscillate within a confined range over an extended duration. At the core of the Spring Strategy lies an abrupt, decisive movement—either above or below the confines of the trading range. This movement is often accompanied by heightened trading volume.

However, rather than perpetuating the momentum in the same direction, prices promptly recoil and re-enter the trading range. This swift and resolute recovery signifies the "spring" phase of the pattern, signifying market rejection of the transient price movement and the amplification of buying or selling pressure.

Traders may use the Spring Strategy as a cue to enter buy or sell positions, indicative of robust demand or supply for the asset near the upper or lower price threshold. It's imperative, however, to complement this strategy with supplementary indicators and manage risk judiciously to curtail potential losses.

Disclaimer

The content within my Scripts, Indicators, Ideas, Algorithms, and Systems is not intended as financial advice or an invitation to trade or invest in any securities. I disclaim liability for any losses or damages, including loss of profit, arising directly or indirectly from reliance on the information provided.

All investments entail risks, and past performance of securities, industries, sectors, markets, financial products, trading strategies, backtests, or individual trading does not guarantee future outcomes or returns. Traders bear full responsibility for their investment choices, predicated on their financial circumstances, objectives, risk tolerance, and liquidity requirements.

My Scripts, Indicators, Ideas, Algorithms, and Systems are purely for educational purposes!