​Explore the 2B rule—Efficient strategy for trend reversal

Before, we talked about the 123 rule, which is an analysis method based on Dow theory, used to confirm trend reversal and identify opening signals. Today we will talk about the similar 2B rules. This is a deformation of the 123 rule. Its purpose is the same as the 123 rule, but it will have a higher success rate than the 123 rule, and the profit-loss ratio is also an ideal form.

What is the 2B rule

The English name of the 2B rule is TwiceBreakout, which means two breakthroughs. As the name suggests, it means focusing on identifying two breakthrough behaviors in the market. This strategy performs well in identifying trend reversals and finding entry points.

Application in bull market

In the bull market, the 2B rule needs to determine the entry opportunity through several points.

High Point A:The price has reached a new high point A after experiencing a sharp rise.

retraces to point B:Then the price pulls back, forming a low point B.

Rise to point C again:The price rose again to reach a new high of point C, but failed to maintain the upward trend.

Break below point A:The price falls below the previous high A, forming a second breakthrough, which is the key breaking point of the 2B pattern.

Application in the short market

In the short market, the short pattern is actually a mirror image of the long pattern.

Low point A:The price reached a new low point A after a sharp decline.

Rounce to point B:Price rebounded from low point A to form a high point B.

Slosed again to point C:The price fell again to reach a new low C, but failed to maintain the downward trend.

Breakthrough Point A:The price breaks through the previous low A, forming a breaking point in the 2B pattern, marking a possible trend reversal.

How to use the 2B rule
Entry point:When the price test reaches an important support or pressure level, use the breaking point of the 2B rule as the entry signal.

Stop loss settings:Set stop loss near the breaking point to control risks.

Profit-loss ratio:Because the 2B rule is usually around the key levelso the stop loss point is relatively close and the potential profit margin is large, thus providing an attractive profit-loss ratio.

For example, after the market fell from 1.10100 to horizontal support 1.07500, it stabilized and pulled upward, then quickly hit a new low, and then retracted to form a 2B pattern. Then when entering the market at the 2B break point, the opening price is 1.07500, the stop loss is at the lowest point of 1.07200, and the stop loss is only 300 small points. After that, the market rose sharply by 2600 small points, and the profit-loss ratio is very ideal.

Precautions

1. Trend confirmation: Ensure that after a clear long or short trend, the market has signs of reversal.

2. Trading volume analysis: During the breaking process from point B to point C, if accompanied by a large trading volume, this usually means a change in market sentiment and increases the probability of reversal.

3. Support and resistance: Using the 2B rule in combination with important support and resistance levels can improve the success rate of trading. The 2B rule is an efficient trading strategy, but it is not omnipotent. In practical applications, other technical analysis tools and market sentiment should be combined with appropriate risk management strategies to improve the chances of the transaction.