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. Backtesting

    The process of testing a trading strategy on prior time periods. ...
  4. Weak Hands

    1. The intention of futures contract holders not to receive delivery ...
  5. Resistance (Resistance Level)

    A chart point or range that caps an increase in the level of ...
  6. Double Top

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

    Using Double Tops And Double Bottoms In Currency Trading

    Find out how to apply the two most common price reversal patterns to your trading.
  2. Charts & Patterns

    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. ...
  3. Forex Education

    Trading Double Tops And Double Bottoms

    We look at how Bollinger Bands help accurately project entry and exit points for pattern traders.
  4. Technical Indicators

    Mastering Stop Placement

    Place the stop loss where, if hit, the reasons you took the trade are no longer valid.
  5. Options & Futures

    Protect Yourself From Market Loss

    There are several simple strategies you can use to protect yourself from downside risk.
  6. Investing Basics

    Stop Loss Order Strategy

    A stop loss order is an order placed with a broker to sell a stock immediately if it drops to a certain price. It's a common way for investors to protect themselves from the possibility of a ...
  7. Options & Futures

    Stop Hunting With The Big Forex Players

    Learn to bank short-term profits by placing stops away from the crowd.
  8. Technical Indicators

    Using Technical Indicators To Develop Trading Strategies

    Unfortunately, there is no perfect investment strategy that will guarantee success, but you can find the indicators and strategies that will work best for your position.
  9. Options & Futures

    Increase Your Profits With Soft Or Mental Stops

    A soft stop provides a trader with added flexibility, allowing him to react to ongoing changes in the market.
  10. Investing Basics

    5 Ways to Double Your Investment

    So if you want to go double, consider these five classic strategies to help turn your vision into a reality.
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. Reverse Mortgage

    A type of mortgage in which a homeowner can borrow money against the value of his or her home. No repayment of the mortgage ...
  2. Labor Market

    The labor market refers to the supply and demand for labor, in which employees provide the supply and employers the demand. ...
  3. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  4. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  5. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  6. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
Trading Center