When a directional bar is followed by an inside bar, and then a directional bar forms, breaking the inside bar in the direction of the trend, a 2-1-2 strat pattern occurs on the candlestick chart. This is a trend continuation pattern.
In the strat trading, based on the direction of trend, 2-1-2 is categorized into two types
- 2-1-2 Bullish Trend Continuation pattern
- 2-1-2 Bearish trend continuation pattern
In this lesson, I will explain this Pattern in detail so you can trade accurately and show you many ideal examples.
2-1-2 Bullish trend continuation
When a 2U directional bar is followed by an inside bar, and then another 2U bar forms, breaking the high of the inside bar, a 2-1-2 Bullish continuation pattern forms on the chart. This shows that the previous bullish trend will continue.
Here are the steps you must follow to identify this Pattern accurately.
- First find a bullish trend by marking higher high and higher low of candlesticks.
- After the formation of the 2U candlestick, an inside candlestick will form. it will also act as a scenario 1.
- The next candlestick will break the high of the inside bar, and another 2U candlestick will form.
Keep in mind that the price must not break the low of the inside bar; otherwise, this Pattern will become invalid.
2-1-2 Bearish trend continuation
When a 2D candlestick is followed by an inside bar, and another 2D candlestick starts by breaking the low of the inside bar, a 2-1-2 bearish continuation pattern forms on the chart. This Pattern is a symbol of bearish trend continuation. We can trade the last 2D candlestick after the break of the low of the inside bar.
here are the few steps to follow to find only high-probability patterns:
- there must be a bearish trend in the market. candlesticks must form lower lows and lower highs.
- Then look for an inside bar candlestick or scenario 1 with 2D candlestick.
- After scenario 1, the next candlestick must break the low of the inside bar and make another 2D directional bar.
Keep in mind that during the bearish trend continuation, the price must break the low of the inside bar only; it must not break the high of the inside bar. Otherwise, the 2-1-2 bearish continuation pattern will become invalid.
Examples
Here are the few examples that a trader must analyse:
Now also check the below pattern that is incorrect because both sides of inside bar are broken. The price must break only in the direction of the prior trend.
The psychology behind the 2-1-2 Pattern
The main Pattern behind the 2-1-2 Pattern is like a rally-base rally or drop-base drop pattern. For example, after an impulsive wave, the market takes a pause or break, and then another impulsive wave forms.
This wave pattern mostly works in the direction of the main trend because the trend shows momentum, and the market flows with the trend.
So, if the trend is bullish, a 2U-1-2U Pattern should form, and you must trade only this bullish Pattern during the bullish prior trend.
on the other hand, for the bearish prior trend, you should trade the 2D-1-2D Pattern.
Market momentum is the main reason behind the winning of this strat Pattern.
The bottom line
2-1-2 is an ideal pattern for determining trend continuation, especially on higher timeframes.
It mostly helps to align the timeline of higher timeframes so we can trade in that direction on lower timeframes for high-probability trades.
I highly recommend that you backtest this Pattern using the screenshot method and then analyze screenshots one by one.
After completing the patterns, I will teach you the final strat strategy, so you also can become a successful trader.
Hardwork is the most important factor. That’s why you should remember to backtest each step.
Comment below 👇 if you have any questions regarding the strat patterns.