The King’s Crown Formation is a very powerful price formation for detecting price reversals. Ultimately, there are two types of king’s crown formations; the Bullish King’s Crown Formation and the Bearish King’s Crown Formation.
Bullish King’s Crown Formation
Here are the rules of a bullish king’s crown formation:
- Price is in a downtrend making lower highs and lower lows
- Price breaks the down trend and makes a new high
- Price retraces to a resistance level or a Fibonacci Level (38.2, 50, 61.8 or 78.6)
- Price rises and starts making higher highs and higher lows
How to Trade the Bullish King’s Crown Formation
- Place limit buy orders at each Fibonacci retracement level (38.2, 50, 61.8 and 78.6). You can also pick the 38.2 & 61.8 or any combination you like.
- Start small and raise your trade size as you go deeper (for example, you can start with 0.1 lot at 38.2% level, 0.2 lot at 50%, 0.3 lot at 61.8% and 0.4 lot at 78.6%). Doing so will average your trade entry price. Always divide your intended trade size by 4 or 5.
- Your 1st profit target will be the 1.27 extension and your 2nd profit target will be the 1.618 extension.
- Your Stop Loss shall go 20 pips below the lowest low OR you can rollover the trade using the trifecta principles.
Example: GBP/USD H4 – Bullish King’s Crown Formation
Bearish King’s Crown Formation
Here are the rules of a bearish king’s crown formation:
- Price is in an up trend making higher highs and higher lows
- Price breaks the up trend and makes a new low
- Price retraces to a support level or a Fibonacci Level (38.2, 50, 61.8 or 78.6)
- Price drops and starts making lower highs and lower lows
How to Trade the Bearish King’s Crown Formation
- Place limit sell orders at each Fibonacci retracement level (38.2, 50, 61.8 and 78.6). You can also pick the 38.2 & 61.8 or any combination you like.
- Start small and raise your trade size as you go deeper (for example, you can start with 0.1 lot at 38.2% level, 0.2 lot at 50%, 0.3 lot at 61.8% and 0.4 lot at 78.6%). Doing so will average your trade entry price. Always divide your intended trade size by 4 or 5.
- Your 1st profit target will be the 1.27 extension and your 2nd profit target will be the 1.618 extension
- Your Stop Loss shall go 20 pips above the highest high OR you can rollover the trade using the trifecta principles.
Example: GBP/USD H4 – Bearish King’s Crown Formation
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