What makes these formations unique is that they can be specifically defined. The ability to formulate a more precise definition sets these formations apart from such vague generalities as "head and shoulders," "coils," "flags," "pennants," "megaphones," and other such supposed price patterns that are frequently attached as labels to the action of prices.

A 1-2-3 high or low comes at the end of a trend or swing. It forms as the result of a change in the direction of prices. The 1-2-3 low forms as the result of buying pressure overcoming that of selling pressure. The 1-2-3 high forms as the result of selling pressure overcoming buying pressure.

A Ross hook™ always forms as the result of profit taking in an trend or swing.

A ledge forms as a result of profit taking, uncertainty about future price direction, or both. You might consider it as a pause in the overall movement of prices in a single direction.

Any data that contains both a high and a low, will form these patterns; even data that has nothing to do with markets and trading.

Learn more about The Law of Charts, it is a free resource on our website. Study it as much as you want. And while you are visiting take a look at the Traders Trick™ entry.

by Joe Ross

www.tradingeducators.com

Information, charts or examples contained in this lesson are for illustration and educational purposes only. It should not be considered as advice or a recommendation to buy or sell any security or financial instrument. We do not and cannot offer investment advice. For further information please read our disclaimer.