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Is it all mostly about chart patterns
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Is it all mostly about chart patterns

  #11 (permalink)
Trading Apprentice
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hv heard that though chart patterns are good for trades, but around only 50
% success ratio of pattern trading has been noticed.

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  #12 (permalink)
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Big Mike View Post
No (in my opinion). Tradition chart patterns are an out of date method to trade the markets. I encourage you to read the book "Evidence Based Technical Analysis" by David Aronson, it will clearly demonstrate the point.

In simple terms, forget traditional patterns like "head and shoulders" and instead focus simply on price action, support/resistance (often called PASR) and auction theory (why the market trades at certain levels).

https://futures.io/elite-circle/3506-elusive-price-action-how-trade.html

https://futures.io/elite-circle/20727-volume-profile-footprint-discussion.html

Also there is something like 250 hours of webinars in the futures.io (formerly BMT) webinar section. I would start watching them.

Last, as a beginner, highly recommend you read this thread front-to-back:
https://futures.io/elite-circle/11125-ask-any-trading-question.html

Mike


Spot on....grasshopper. But let's not forget about money management. What are you willing to accept as risk, and how will you contain that risk...for starters. And, then its a question of how do I maximize profits. The faithful execution of a money management plan turns you from a trading zero, to a trading hero, relegating most market-related exercise, entry & exit, selection, etc., to their rightful place as secondary or tertiary concerns, contrary to what most believe.

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  #13 (permalink)
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T'is all about good feature extraction which leads to great entries and good money management which results in relaxed trade management, trade exit and profits to make it all worthwhile. The 'patterns' are more generic than what most consider, it is what is being triggered between the ears, not just a standard TA name. Applies to volume dimension just as much as price.

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  #14 (permalink)
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The initial post and many of the replies raise interesting points. " It's mostly about chart patterns" If " it" is finding an entry, ( and hopefully and exit) well yes I suppose that is true. Recognizing some pattern in the chart or in the technical data is what it is about. Whether that is done by using indicators or candlestick patterns, or price action, or whatever. When I first started it was recommended to me that I learn some basic candlestick patterns and a small number of basic indicators. Learn a few basic setups and wait for them. It worked pretty well.
However, as most of the people on the forum can tell you, it is not that simple. There is a lot more to being a successful trader than just finding good entries.

Another thing I want to mention, sometimes I think people with a lot of experience and knowledge forget that they have it. There are people who can trade with out indicators. In fact I've known some old time currency and pit traders who did not even need a chart. Just the listening to the numbers was enough. But I suspect the truth is that the reason these people are able to trade that way (without indicators) is that they have years of experience trading with them. They can do it that way because they have reached a level of expertise. I would not recommend it a beginner.

As a beginner I would suggest learning some basic setups. Or pick some well regarded trading book and do what they say, until you learn more. But I would not over complicate. Try to stay as basic and simple as possible.

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  #15 (permalink)
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mcteague View Post
...
As a beginner I would suggest learning some basic setups...

Define basic setups...

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  #16 (permalink)
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trendisyourfriend View Post
Define basic setups...

Okay. Here are some that I have used. Are they perfect no. But they worked pretty well and I don't think they would be unknown to people here.

1. Stochastic move. When the stochastic crosses above 20 and is confirmed by macd enter long. (reverse for short with 80 cross)

2. Bollinger band breakout. Price is hugging the upper band. It breaks above then falls back down. Place a buy a little above where it went to. If it breaks again it will be traveling with momentum and will probably run higher.

3. Fib retracement Price has been moving up, but now heads down to a standard fib level and bounces off. Buy it.

4. Basic candle patterns. You see a lot dojis, or hanging men, or hammers. Know what they mean and be prepared to take action.

5. Know what a swing pivot is and its relationship to stop setting. (and other resistance and support concepts)

6. Look for higher highs, higher lows etc as trend indicators.

I mean just learn a few basic indicators and chart or candle patterns, and start there.
I am not saying that anything listed above is earth shattering. And certainly not guaranteeing you will not lose money. I am just suggesting that beginners start with a few basic indicators and learn a handful of setups.


Just realized that I did not really define. So a basic setup would be a setup using long established and commonly known indicators and or charting ideas.


Last edited by mcteague; February 9th, 2013 at 07:49 PM. Reason: adding
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  #17 (permalink)
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trying to identify textbook cliche chart patterns (a la Magee and Edwards), is about as anachronistic a way of analyzing the market as....


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as short-shorts in the NBA!!!



por ejemplo...

Head-and-shoulders top, bull pennant, and inverted head-and-shoulders...all false!!!




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Last edited by tigertrader; February 9th, 2013 at 09:17 PM.
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  #18 (permalink)
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Thanks for the definition. I was thinking a basic setup could be something as simple as trading a pullback to a moving average when prices move with conviction up or down. One could wonder why if such basic setups do exist people are still losing money!!!


mcteague View Post
Okay. Here are some that I have used. Are they perfect no. But they worked pretty well and I don't think they would be unknown to people here.

1. Stochastic move. When the stochastic crosses above 20 and is confirmed by macd enter long. (reverse for short with 80 cross)

2. Bollinger band breakout. Price is hugging the upper band. It breaks above then falls back down. Place a buy a little above where it went to. If it breaks again it will be traveling with momentum and will probably run higher.

3. Fib retracement Price has been moving up, but now heads down to a standard fib level and bounces off. Buy it.

4. Basic candle patterns. You see a lot dojis, or hanging men, or hammers. Know what they mean and be prepared to take action.

5. Know what a swing pivot is and its relationship to stop setting. (and other resistance and support concepts)

6. Look for higher highs, higher lows etc as trend indicators.

I mean just learn a few basic indicators and chart or candle patterns, and start there.
I am not saying that anything listed above is earth shattering. And certainly not guaranteeing you will not lose money. I am just suggesting that beginners start with a few basic indicators and learn a handful of setups.


Just realized that I did not really define. So a basic setup would be a setup using long established and commonly known indicators and or charting ideas.


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  #19 (permalink)
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for those people in the room that have more patience and way more grace than he does. wldman is learning when to keep his mouth shut. @tigertrader and @Big Mike special recognition for the two of you.

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  #20 (permalink)
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tigertrader View Post
Head-and-shoulders top, bull pennant, and inverted head-and-shoulders...all false!!!


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One of the reasons I like the book I mentioned "Evidence Based Technical Analysis", is he specifically addresses the way when traders talk about a pattern that is "setting up" (future) vs the way they talk about it after-the-fact. It's interesting to note, although not surprising, that once you compare the "setting up" pattern to the "after-the-fact" pattern, they rarely agree, and in fact often become entirely different patterns.

Thus, pattern trading in this regard is worthless, imo.

Naturally, studying historical charts and searching for patterns in them is easy. I could also tell you it would have been smart to buy the ES at the 680 low in March 2009. More useful is what happens in real time, comparing that real-time analysis to a post-trade or post-setup analysis, that is the focus...

BTW, if you are a pattern type of trader, you might find the platform called "MTPredictor" useful (lots of wave analysis, he did a webinar on futures.io (formerly BMT) too). At least this tool also focuses a lot on risk, which is of key importance to me.

Mike

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