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Dragon Patterns

The Dragon pattern or Inverse Dragon pattern is similar to the "M" or “W” pattern or the Double Bottom or Top pattern which usually form at the market tops and market bottoms. Dragon patterns work in all timeframes and in all market instruments. Like most “Double bottom” patterns, “Dragon” patterns present excellent trading opportunities with low risk to reward ratios.

Prices declines from the head level and form two legs of the “Dragon”. The two legs in a “Dragon” pattern usually form within 5% to 10% of the price difference. The second leg has a strong indication of reversal as it posts a key reversal bar, or a “divergence” in any oscillator indicators. The price rise in the second leg is usually followed by a spike in the volume. A Trend line is drawn connecting the head of the “Dragon” to the hump. When the price closes above the trend line and confirmed by prior price action or divergence in any oscillator, it signals a reversal. The second confirmation of “Dragon” occurs when the price closes above the hump from 38% to 50% of the range from head to the first leg.

How to Trade Dragons

Dragons (All X5 Patterns)

Trade Examples

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