Understanding the King's

How to Trade the King’s Crown Formation

Detecting price reversals can elude even the most skilled traders - one such mechanism at your disposal is the king's

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

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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

  1. 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.
  1. 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.
  1. Your 1st profit target will be the 1.27 extension and your 2nd profit target will be the 1.618 extension.
  1. 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

bullish

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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

  1. 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.
  1. 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.
  1. Your 1st profit target will be the 1.27 extension and your 2nd profit target will be the 1.618 extension
  1. 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

bearish

 

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