{"id":1023550,"date":"2023-10-04T17:20:11","date_gmt":"2023-10-05T00:20:11","guid":{"rendered":"https:\/\/www.tradingheroes.com\/?p=1023550"},"modified":"2024-03-29T21:42:01","modified_gmt":"2024-03-30T04:42:01","slug":"second-spike-chart-pattern","status":"publish","type":"post","link":"https:\/\/www.tradingheroes.com\/second-spike-chart-pattern\/","title":{"rendered":"What is the Second Spike Chart Pattern in Technical Analysis?"},"content":{"rendered":"

Chart patterns are valuable because they give us clues as to what the markets might do next.<\/p>\n

In this tutorial, I'll introduce you to the Second Spike chart pattern<\/strong>. I'll show you how to identify it properly and what it can tell you about what the market is likely to do next.<\/p>\n

The Second Spike chart pattern is a reversal pattern that happens after a strong move, usually in the bullish direction. It signals that the market could be reversing and may provide a trading opportunity in the opposite direction.\u00a0<\/strong><\/p>\n

How to Identify a Second Spike<\/h2>\n

There are basically 3 components of this chart pattern.<\/p>\n

Once these characteristics are present on your chart, you may have a Second Spike<\/strong>.<\/p>\n

1. Look for a Strong Move<\/h3>\n

The first criteria to look for is a strong move in the upward direction.<\/p>\n

This pattern works best with bullish reversals, so I'm only going to look for strong upward moves. It can work for bearish reversals, but I've noticed that it's less reliable.<\/p>\n

But test both to see what works best for the market you're trading.<\/p>\n

Here's an example of a strong bullish move.<\/p>\n

\"Strong<\/p>\n

2. Mark off the Elbow<\/h3>\n

The elbow<\/a> is a zone on a chart where price previously turned.<\/p>\n

Mark off the bottom of the turn, until about half way to the high of the move.<\/strong><\/p>\n

You're going to be targeting this area if the market does a Second Spike<\/strong>.<\/p>\n

This is what it looks like.<\/p>\n

\"Second<\/p>\n

3. Look for a Retracement Back Into the Elbow<\/h3>\n

Now that you have the retracement zone marked off, it's time to watch your chart and wait for price to move back into that area.<\/p>\n

Set an alert if your platform has that feature.\u00a0<\/strong><\/p>\n

This will ensure that you never miss a trade.<\/p>\n

Once price enters the zone, it's time to take a trade.<\/p>\n

How to Trade a Second Spike<\/h2>\n

Now as you may have guessed, the ideal entry for trading this chart pattern is to take a trade as soon as price gets into the elbow zone.\u00a0<\/strong><\/p>\n

This is called a Hard Fade entry<\/strong> and you can learn more about it here<\/a>.<\/p>\n

Do not wait for any confirmation.\u00a0<\/em><\/p>\n

Entering as soon as price enters the elbow zone will give you the best chance of success and is usually the cheapest price you're going to get on this trade.<\/strong><\/p>\n

\"stop<\/p>\n

The example above shows an idea entry in the elbow zone. The trade worked out well, with price moving back down near a previous support level.<\/p>\n

Examples of Second Spikes<\/h2>\n

Here are more examples, so you can see this concept in action. I'll show you each step of the process, so you'll have a better idea of what to look for in real-time.<\/p>\n

Example 1<\/h3>\n

After a big bullish move, price starts to stall and forms a top.<\/p>\n

At this point, I mark off the elbow zone, as shown in this chart.<\/p>\n

\"Second<\/p>\n

Next, I wait for price to re-enter that zone and I take a trade in the opposite direction. Here's where I would take a short trade.<\/p>\n

It can take a little bit of practice to enter these trades because the big bullish bar might make you nervous.<\/p>\n

But once you get the hang of it, that's not a big deal.<\/em><\/p>\n

The stop loss<\/a> will go above the highest high of the last move.<\/p>\n

\"Second Now that the trade is on, I'm just going to sit back and wait to see what the market does.<\/p>\n

I would set a take profit on this trade, based on where I think price is likely to go. The horizontal lines would be my 2 potential profit targets.<\/p>\n

In this example, I did not get stopped out. Price retested the elbow zone, but it did not hit the stop loss.<\/p>\n

If I was able to hold the trade for this long, I would have been rewarded with a big downward move.<\/p>\n

\"Profit<\/p>\n

As you can see, it took some time for this trade to work out, so I would have had to be patient.<\/p>\n

Not all Second Spikes are clean, some of them are messy, like in this example.<\/p>\n

Example 2<\/h3>\n

Now I'll speed things up a bit and put all of the information on 1 chart.<\/p>\n

There was a strong upward move in the GBPJPY and there were 2 opportunities to enter a short position on a Second Spike entry.<\/p>\n

\"Second<\/p>\n

Example 3<\/h3>\n

This is another example where there were 2 opportunities to enter on a Second Spike.<\/p>\n

If you took this trade, it would have worked out well, with price dropping below previous support.<\/p>\n

\"Second<\/p>\n

What Happens When They Don't Work<\/h2>\n

If a Second Spike doesn't work, your stop loss will get hit and you're out of the trade.<\/p>\n

It's all good, move on to the next trade.<\/em><\/p>\n

Just like with any other profitable trading strategy<\/a>, not all trades will be winners.<\/p>\n

But if you've backtested your strategy<\/a> and it has an edge, then keep calm and keep trading.<\/strong><\/p>\n

Final Thoughts on Second Spikes<\/h2>\n

Now that you know what Second Spikes<\/strong> look like, it's time for you to create a trading strategy.<\/p>\n

If this chart pattern appeals to you, of course.<\/p>\n

The first step is to create a trading plan. I have a free worksheet<\/a> that will help you create a detailed trading plan.<\/p>\n

Then backtest<\/a> your trading strategy to see if it has an edge.<\/p>\n

If your strategy doesn't perform as well as you would like, experiment with different ideas and optimizations<\/a> until you develop a trading strategy that you're happy with.<\/p>\n

Now get to work!<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Learn how to trade the Second Spike chart pattern. This is a reversal chart pattern that can be used to identify potential opportunities.<\/p>\n","protected":false},"author":2022,"featured_media":1023563,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[201579],"tags":[201009,203540],"class_list":["post-1023550","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-trading-strategies","tag-chart-patterns-explained","tag-second-spike-chart-pattern","generate-columns","tablet-grid-50","mobile-grid-100","grid-parent","grid-33"],"yoast_head":"\nWhat is the Second Spike Chart Pattern in Technical Analysis? - Trading Heroes<\/title>\n<meta name=\"description\" content=\"Learn how to trade the Second Spike chart pattern. 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