Memory-Of-Price Strategy

DEFINITION of 'Memory-Of-Price Strategy'

A trading strategy that assumes the support and resistance points of double tops and double bottoms exert an influence on future price action after they have been broken. The memory-of-price strategy says that after support or resistance has been broken and the majority of stops have been cleared, the price will be attracted back to these support and resistance levels.

This strategy is based on the theory that it will take a very large amount of buying or selling to exceed the prior range of the double top or double bottom, respectively.

BREAKING DOWN 'Memory-Of-Price Strategy'

This strategy appeals to traders who are frequently taken out by their stops, only to see the price reverse and ultimately move in their predicted direction. This strategy often banks small profits, but it is important to note that when the strategy misses, losses can be quite large. For this reason, it is imperative that the trader sticks to his or her stops when using this setup.

RELATED TERMS
  1. Double Up

    An investing strategy in which a trader doubles his or her current ...
  2. Double Top And Bottom

    Chart patterns in which the quote for the underlying investment ...
  3. Double Bottom

    A charting pattern used in technical analysis. It describes the ...
  4. Weak Hands

    1. The intention of futures contract holders not to receive delivery ...
  5. Backtesting

    The process of testing a trading strategy on prior time periods. ...
  6. Double Top

    A term used in technical analysis to describe the rise of a stock, ...
Related Articles
  1. Trading

    Profit From Currency Spikes With This Memory-Of-Price Strategy Variation

    Use this single-entry strategy to capitalize on currency spikes by anticipating reversals.
  2. Trading

    Using Double Tops And Double Bottoms In Currency Trading

    Find out how to apply the two most common price reversal patterns to your trading.
  3. Trading

    Analyzing Chart Patterns: Double Top And Double Bottom

    By Chad Langager and Casey Murphy, senior analyst of ChartAdvisor.com The double top and double bottom are another pair of well-known chart patterns whose names don't leave much to the imagination. ...
  4. Trading

    Forex: The Memory Of Price Strategy

    Hate getting stopped out right before the price reverses? This forex trading strategy may help.
  5. Trading

    Trading Double Tops And Double Bottoms

    We look at how Bollinger Bands help accurately project entry and exit points for pattern traders.
  6. Investing

    Mastering Stop Placement

    Place the stop loss where, if hit, the reasons you took the trade are no longer valid.
  7. Investing

    Protect Yourself From Market Loss

    There are several simple strategies you can use to protect yourself from downside risk.
  8. Trading

    Time to Sell These Stocks Wiith Double Tops

    These stocks have completed a topping pattern, indicating their run higher may be over.
  9. Trading

    Interpreting Support And Resistance Zones

    Use of support and resistance zones can be a key to successful trades. Learn how they work and how to use them.
  10. Trading

    Maximize Profits With Volatility Stops

    Find out which type of volatility stop fits your trading objectives.
RELATED FAQS
  1. What are common trading strategies when identifying a double top

    Learn strategies traders use when a double top pattern is spotted. This pattern is common and can be profitable in the equity ... Read Answer >>
  2. How effective are double bottoms in spotting a change in direction of the overall ...

    Learn more about the double bottom price chart pattern, a commonly bullish reversal indicator that can also be used to establish ... Read Answer >>
  3. How effective are double tops in spotting a change in the overall trend?

    Learn about the double top price chart pattern, a commonly appearing indicator used to establish resistance levels and possible ... Read Answer >>
  4. What are the main differences between a double top and a double bottom?

    Identify double tops and double bottoms, and learn what each could mean for the security's current price trend. Discover ... Read Answer >>
  5. What are common trading strategies used when identifying a double bottom

    Use simple, low-risk trading strategies to take advantage of a double bottom formation. Traders typically take one of these ... Read Answer >>
  6. What does a double top tell a trader about the overall trend?

    Find out what technical chartists mean by a double top trend in a security's price movements, and learn why double tops are ... Read Answer >>
Hot Definitions
  1. Quantitative Trading

    Trading strategies based on quantitative analysis which rely on mathematical computations and number crunching to identify ...
  2. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  3. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  4. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  5. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  6. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
Trading Center