Rally Base Rally or RBR is a Demand zone representation of the Price pattern that forms within the chart of a particular holding. The Rally Base Rally belongs to a category of price pattern called the Supply and Demand Price pattern. In this price pattern, there is the formation of two bullish impulsive waves and one retracement wave that produces what is collectively called the Demand zone. Supply and demand are considered the fundamentals of technical analysis and without them, one cannot become a skilled technical analyst. Hence this article covers one among many aspects of it which is the Rally base Rally strategy.
Identification guide for Rally base rally Strategy
As discussed above a simplistic form of Rally base Rally price pattern consists of 3 candle sticks that are:
- Two bullish impulsive waves or two large bullish candlesticks
- One retracement wave or One base candlestick
The base candlestick is in between the two large bullish candlesticks. There is a simple formula to identify the Rally base rally better,
Rally Base Rally = One Bullish Candle stick + Base Candelstick+ Another Bullish Candlestick
A good RBR price pattern can be profitable for the trader but it requires a sharp eye. There are a few criteria that need to consider to identify a great RBR price pattern for enhancing the profit chance,
- The body-to-wick ratio of the large bullish candlesticks should be greater than 70% of the candlestick’s size.
- In the base candlestick the body-to-wick ratio should be less than 25% of the total candlestick size.
- A demand zone in the RBR pattern can have one or more than one candlesticks.
- Drawing a demand zone area helps the better analysis of the prices in the RBR price pattern.
To draw the demand zone mark the lowest price among the lowest point that any base candlestick touches and draw a straight line horizontally using that mark. Repeat the similar process to drawing a line by marking the highest price among the lowest point that any base candlestick touches. The area between these horizontally drawn lines is considered a demand zone.
A Trader’s understanding of the Rally Base Rally Strategy
After drawing a demand zone one acquired the area where the buyers are more active and the demand zone simply symbolizes that there is a possibility of large purchasing quantities in that particular area.
This lower the analyzing area for the traders to concentrate and leave the other chart formations aside.
But there is a common challenge that a trader face which is identifying the rally base rally price action before its completion so that one can buy within the demand zone and sells after the last rally candlestick touches its highest price point. To achieve this in the ongoing market setup there are practices that a trader can follow, let’s see that in the next section.
How to tackle and trade in Demand Zone?
The main aim of a trader from the formation of the Rally base Rally price pattern is to make purchases within the demand zone to sell higher.
There are mainly two methods to trade within the Demand zone that are:
- If the price suddenly pullback after the base candlestick formation then it is an indication to purchase at a price pullback towards the zone.
- If in case the price does not pull back after the base candlestick formation then wait until the price come back to the base zone and again form the primary bullish candlestick. And the process repeats itself.
After drawing the demand zone wait for the above first method and when it occurs place the purchase order with stop loss at the lower horizontal line of the demand zone. Hold the trade until the 1:2 risk-reward ratio, and after that partially closes the trade or break even.
Disadvantages of the Demand Zone
There is only one disadvantage of the Rally Base Rally strategy it is not able to predict the levels where one can book the highest profits in the started trade. Hence sometimes a person using the Rally base Rally strategy alone sells the trade at early stages or even loses the chance to book the profits. It is advised to use other price patterns along with the Rally Base Rally strategy to get a better evaluation of the selling points to book the highest possible profit margins.
Rally Base Rally strategy is one of the highest probability-based price patterns that one should study in depth if one wants to book the highest possible profit margins from the market. Hence try to practice the Rally Base Rally Strategy based on the information that is provided in this article and combine the Strategy with other price patterns too to enhance the assurance of higher profit margins.