We would summarize the ZoneTraderPro Exhaustion Trade as follows

• The exhaustion trade develops when the market reverses from minor support or resistance.
• The market can trade to a test of a previous high or low, normally the intermediate zone.
• More commonly, the market will trade to trend support or resistance.
• While the pattern will work in the pre-market, the odds are greatly reduced as you do not have the TICK strategy to tell you the strength of the move.
• Taking this trade after breaking news should be avoided.

A trading plan would take into account the following considerations

• Using the ZoneTraderPro TICK strategy to filter trades.
• Develop a profit target.
• Develop a stop loss.
• The stop loss must take into consideration additional risk if the trade is entered from an intermediate zone.
• Develop a breakeven strategy.
• Taking profits early if a high risk trend trade may succeed.
• Moving the stop if a second exhaustion trade develops immediately develops in the same trading direction.

The ZoneTraderPro software for the exhaustion trade can be obtained from the downloads page.

The software will give an audible and visual alert when the two conditions to the exhaustion trade have been met. Once there has been a six tick move off of the minor zone, and audible alert will sound, and a blue "EX" symbol and arrow will appear on the chart.

Approximately 30% of the time, the reversal will occur from the intermediate zone in a test of a previous high or low. This is why the arrow is blue, because a trade is imminent and may occur from this area.

 

The blue indicator will turn red or green when the market is within two ticks of the trend zone.