Lets look at yesterday's trade on the Dax.

The major trend moves came off multi bar highs and lows.

I have found this to be consistent behavior.

This type of price movement suggests that trends the majority of the time do not start from the middle of tight congestion.

Price tends to wash out either the buyers or sellers before trending.

The price trends down are marked with an orange line.

The price trends up are marked with a green line.

Note that the trends started after failed expansion bars.

We can use information through study to formulate trading strategies.

Dax trends.jpg (124.67 kb)

A topping pattern on this chart of the SPI is what I call a tap pattern.

I have other examples in past posts

The initial high has hit round number resistance at 3900.

The secondary high was unable to retest highs and had a more rounded shape as price fell away.

Possible trade shorts set up as the price bar expanded to the downside.

A tricky second move up also failed setting up a possible re-entry or 2nd trade.

 Who says patterns don't repeat.

Failure of the high at 3900 again.

Price rolling over then a secondary failure.

Price then testing previous support around 3870.

We can see with both these trades a tight stop would need a 2nd re-entry to profit after the second retest of the "rounded high".

A set stop above the "rounded highs" would have coped with the pullbacks.