Please find the original quote from ST da, thread.
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In my thread "Ideas on day/swing trading" I have discussed many trading ideas.One of the ideas discussed there is my favorite...I have learned it from Saint and the credit goes to him.We called it
Virtual High/low.
I have done some thinking on this pattern and I find that it is a high success rate pattern with a solid price logic. This pattern is a form of Test pattern.
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NF is in downtrend, it takes a rally and makes rally top at A. Then the decline starts and the market goes down.The market gathers strength at the decline bottom and stages another rally and goes to B....now observe carefully.Bar marked B is a bullish candle and it closes in the wick or tail area of bar A....this means that the bulls tried their best to take the market up and break top A but they lost their power and could not push it up any further. This is virtual high and when low of bar B is cracked, it means the market is reversing its direction....so we sell short.
The same pattern happened at the bottom. Look at C and D and the reversal was indicated. This gives a very high RR trade and one can catch the reversal at almost high/low point.
In my next post I will post this pattern worked in NF yesterday...
These are reversal patterns so make sure that there is some price move before a reversal is likely and dont try to fit this pattern to every alternate bar...also see to it that A,B are at some distance and not consecutive bars.
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Look at A,A' and B and see how at a resistance zone a reversal is indicated is closing in the wick/tail of A and A' and triggering virtual high reversal once low of B is cracked.