A failed break is probably one of the most boring phenomena that can occur and unfortunately, this can happen often. Traders have invented various techniques in order to manage them. In our tutorial, we will talk about the simplest but most common model: the 2B model that was developed by Trader Vic (this model is sometimes called “spring”). It is named after its creator, Victor Sperandeo, who is also known in the traders community as “Trader Vic”.

In his book “Principles of Professional Speculation”, Victor Sperandeo describes Model 2B as follows: “With an uptrend, if prices penetrate the previous high, but fail to cross and fall immediately below the previous low, this suggests that the trend is going to reverse. ” The opposite scenario is also true for a downtrend.

The 2B model can be easily found on intraday charts. For Model 2B to appear, prices must reach a new high or a new low, so there should be a withdrawal followed by a new up / down test. If the test fails, it is a correction signal and may even signal a potential trend reversal. Now, let’s discover the trading rules of this model in the context of bearish or bullish trends.

Rules from the top of Trader Vic Model 2B

Suppose there is an uptrend; the market reaches a new high (maximum of bar 20), then it tries to go back for the next 5-8 bars. After the retracement, the prize tries to pass over the new high and close above the new high. Here you have to mark this bar as a break bar. If the upward movement does not continue after this, this is the last step of the top of a 2B model. At this point, you should be preparing to sell. Place a Stop-loss at the last Swing Up and place a Take Profit at the low swing preceding the new high.

Rules of the lower part of Trader Vic model 2B

Prices are trying to hit a new low (bottom of bar 20). When trained, there should be a pullback with the next 5-8 bars for a good retracement. The market is attempting a correction from the direction of the initial trend (which is down) and closing below the new low. You can mark this bar as a break bar. There should be no further continuation to close under the break bar; prices close above the top of the break bar. You can place a long position above the top of the bar that has fenced above the break bar. Place a stop loss below the bottom of the recent swing. A target point can be found near the high swing preceding the new low.

Source of article – https://fbs.com