The candle pattern “Splash and Shelf” was introduced by Linda Raschke in the book “Stock Secrets”. Surge and Shelf is a tactic for day trading that recognizes trend reversals after very fast and strong price movements when buyer pressure is depleted. For day trading, this strategy provides two huge advantages. Firstly, the risk can actually be limited by the initial stop loss. Secondly, fast and high price jumps have a wave-like shape when a trend reversal develops from an extreme situation.

The Splash and Shelf model consists of 3 components:

Settings:

• Ledge: Max price range (in points): the maximum price range for the “Shelf”, in points. Older timeframe = larger range (for example, 50 points for H1) and vice versa for younger timeframes
• Ledge before spike: Min length (in bars): the number of bars before the “Spike”, in this case the “Shelf” is consolidation before the breakdown
• Ledge after spike: Min length (in bars): the number of consolidation bars after the “Spike”. Recommended 15
• Spike: Min range (%% of ledge max range): the minimum range of the “Spike” as a percentage of the maximum range of the “Shelf”. The “splash” is set as a percentage of the previous “Shelf”
• Spike: Max length (in bars): the maximum number of bars in the “Shelf”
• History Bars Limit: the number of bars to search for this model
• Alert (Popup/Email/Push): Select the preferred type of alerts.

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Other:

This strategy works on all timeframes and currencies/indices. Timeframes H1 and older are recommended, but when adjusting the settings, trading on lower timeframes is also possible. This strategy is also suitable for indices or stocks.

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