Memory of Price Strategy - Explained
What is the Memory of Price Strategy?
Written by Jason Gordon
Updated at April 17th, 2022
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Table of Contents
What is the Memory-Of-Price Strategy?How Does the Memory-Of-Price Strategy Work?An Example of a Double Top PatternWhat is the Memory-Of-Price Strategy?
A memory-of-price strategy is a trading strategy in which double top and double bottom resistance points influence future prices of products. According to this strategy, when the resistance points are broken, market prices are influenced. A double top is a term that describes two consecutive or successive increases to a price level while a double bottom refers to two equal reversal in price. A double is otherwise called a resistance price and a double bottom is called a support price.
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How Does the Memory-Of-Price Strategy Work?
This memory-of-price strategy is a trading strategy believes that a great amount of purchase and sales need to occur before prices can exceed or decrease below the double top and double bottom points. A double top occurs when two successive increases to price level and double bottom occurs when two price reversal or decline levels. The memory-of-price strategy offers a low-profit margin and higher risks to traders who use it.
An Example of a Double Top Pattern
A double top is a chart pattern that indicates two consecutive peaks in price, despite that this looks positive, it signals a decline in price. Once prices have reached a peak in a successive manner, double bottom occurs, this is when prices come back to the floor level. The floor level is inevitable because when the value of a product or asset is no longer increasing in value, prices cannot remain at the peak, they have to come back to the floor level.