Chart Patterns

[ceasar73]

still havent got a clue if you guys think they are of use or not??

 

[Trembling Hand]

Why doesn't anyone around here say what they think then

Why lie just to start an argument

And why give t/a such a bad rap when someone is asking a legitimate question

Brad you are on the wrong track here. MichaelD didn't lie. You just don't understand what he is saying.

 

[ceasar73]

Brad you are on the wrong track here. MichaelD didn't lie. You just don't understand what he is saying.

I didnt get what he was saying either

 

[beamstas]

Brad you are on the wrong track here. MichaelD didn't lie. You just don't understand what he is saying.

He said 0.1% of people on here are profitable at the moment. That is a lie.

And how are chart patterns random
Lets take the SPI for example
Resistance right near the JAN Highs
Why?

Because people who bought in january are happy to exit at break even and get out. People who bought in the dip can't wait to take profit and they bail out when the price bounces back from sellers who bought in january. This is what creates resistance. Nothing random about that

 

[Trembling Hand]

Charts do not "predict" anything. they do not tell you that they are going this direction for this long. This is what I mostly believe and what i think he is saying.

I have another view, in part, that i may get to if Tech doesn't cover it.

mean while back to my charts

 

[ceasar73]

Charts do not "predict" anything. they do not tell you that they are going this direction for this long. This is what I mostly believe and what i think he is saying.

I have another view, in part, that i may get to if Tech doesn't cover it.

mean while back to my charts

dont tease us TH!!!
give us your view pls..

 

[LM]

From an article I received today. Van Tharp - Judgmental “Heuristics” Or Biases and Developing Your Trading System, Part 2

I cannot overemphasize enough that trading indicators are merely ways of representing things of interest. Does a significant chart pattern actually mean that buyers are about to dominant sellers, or vice versa, and produce a significant price change? Of course not! It merely represents the possibility such an event might occur. Thus, any indicators you develop for buying or selling in markets are your way of representing potential trading opportunities. It is not the opportunity per se.

My take: "convince" yourself the pattern gives rise to higher probability trading opportunities through testing, feedback etc, then they "work"...

 

[nomore4s]

And why give t/a such a bad rap when someone is asking a legitimate question

Brad,

MichaelD wasn't giving TA a bad wrap, as far as I know he uses TA (in some form anyway) to trade, you've just totally misunderstood what he is saying.
Michael is a very expirenced trader with a good amount of knowledge, if anything his post provides alot of insight into how & why TA can work if applied correctly. TH's post below is along the same lines.

All the others (TA doubters) + many that are using them think they are a "predictive" tool but they are not. They use them as a way to stay in a trade.

IMO, this is where alot of people who don't understand TA get lost, it's not about predicting anything. At best a chart will reveal possibilities, how we trade and then manage those possiblities determines if we are profitable or not over the long term.

 

[Cartman]

Yes Cartman but they don't actually predict anything do they?

thats the thing with charts. All the others (TA doubters) + many that are using them think they are a "predictive" tool but they are not. They use them as a way to stay in a trade.

Hopefully longer than you stay in your losers.

yeah i realise that TH ---- actually those two charts i posted arent even price charts --- they are what i call cycle/range charts ---- thats why they look so smooth lol

patterns" are fine for an overview but i couldn't trade off a 4 hr chart to save my life -----

its the relativity of what price is doing in relation to the cycles and the range which which i look for ----- ie price anomalies which are not backed up/ or in sync with Momentum

 

[nomore4s]

He said 0.1% of people on here are profitable at the moment. That is a lie.

Brad, he didn't lie, that is his opinion - he doesn't know that for sure, it could be right or wrong.

 

[tech/a]

Why doesn't anyone around here say what they think then

Why lie just to start an argument

And why give t/a such a bad rap when someone is asking a legitimate question

The issue is this you dont know Michael and how he trades.

Unless you wanna put your money where your mouth is?

Im willing to bet you trade FA
That's why you have lost money in the last year

Legitimate questions fine.
Hey I like being Policeman for a while instead of Toxic!

 

[beamstas]

Brad, he didn't lie, that is his opinion - he doesn't know that for sure, it could be right or wrong.

There are more than 25 people on this board who are profitable.

Next time i read a post, i won't read it for how it is

I'll apply to the post to the poster and his personal trading and personality
I'll work out whether he was stating fact or opinion
I will determine whether the post is sarcastic or a joke
I'll get to know the poster and how they trade

From this i will decipher the true meaning of the post

Brad

 

[Ardyne]

I think theyre extremely useful. I only started making miney since I started using them. The fact is though they are not 100% accurate but they help.

If you get a breakout down on a rising wedge and enter you have to know the best place to put stops correctly so you survive a pull back but dont lose too much if it moves against you.

To be honest they help more with deciding which trades NOT moreso than which ones to enter.

 

[alwaysLearning]

The past does not equal the future. So therefore looking at a chart's past is never going to allow you to know for sure how future price action will turn out.

BUT, the good thing about support and resistance and patterns etc is that it gives you a framework to see how the current price is responding or behaving at major levels of support and resistance or what ever pattern you are looking at--say a double top.

If you see price strongly break these levels and say you see a reversal pattern develop, it is not that you know that price will definitely reverse and go flying in your desired direction, but rather that it is more likely to go in your direction as opposed to just guessing blindly.

So, for every trade you need to have good reasons to get in and good reasons to get out. Watching the chart and looking at important levels helps you to figure out where to put a stop loss...then you can calculate your risk and how many units to buy or sell. etc etc.

So in summary yes, patterns do work, but from my perspective purely to give the current price some sort of context, so that you can make better decisions.

I'll add my disclaimer that I am still trying to be profitable and I've been learning full time since July last year. I am progressing much better though since I began taking screen shots of every single trade and editing it in 'paint' and writing explanations of why i took the trade and little things that interest me. Going over my past trades helps me heaps in getting into the right frame of mind.

 

[IFocus]

GG, traders / investors only ever use patterns

FA, TA, star patterns all patterns. Even TH use's patterns to trade we all do

Do any of them make money?

Yes of course they all do.....its up to the operator to implement the pattern strategy correctly that creates the profits.

 

[IFocus]

There are more than 25 people on this board who are profitable.

Next time i read a post, i won't read it for how it is

I'll apply to the post to the poster and his personal trading and personality
I'll work out whether he was stating fact or opinion
I will determine whether the post is sarcastic or a joke
I'll get to know the poster and how they trade

From this i will decipher the true meaning of the post

Brad

Brad through 2008 I think that's plausible.

 

[MichaelD]

Let me clarify a few things (even though to my mind what I said was perfectly clear).

1. I have been consistently making equity peaks this year and thus consistently making my "wage" from the markets (I take my wages out whenever I reach a new equity peak). The $ value is not enough yet to completely give up my day job at this stage, but I am heading in the correct direction to do so. i.e. I can see where I'm going and I am aware of how I'm going to get there. So long as my systems continue to perform as expected I will reach my goal if they scale up as expected/planned.

i.e. I am consistently profitable at present in the current market conditions.

2. I use technical analysis to enter trades. Perhaps the more correct term is that I ABuse technical analysis to enter trades, but that's an entire thread on its own and I have no interest in giving away any of my edges.

3. I have no interest in fundamentals and very little interest in conventional technical analysis apart from using these as insights into how others think. Suffice it to say that herein lies truly profitable edges.

4. There is no technical pattern nor school of analysis, none at all, that provides ANY meaningful predictive ability whatsoever. Having said that, if by applying a form of analysis you favourably skew risk/reward in your favour, then you are getting value from your analysis (but it's NOT the entry analysis that's making the money). e.g. Resistance/support levels are not predictive, but if you use them to enter trades with favourable risk/reward (quickly admit you're wrong, let your winners run) then you will win in the long run.

The value of forgetting about finding the perfect entry and concentrating instead on trade and money management simply cannot be overemphasized, and it's this which differentiates the profitable from the masses. I have become very adept at taking small losses.

5. I have become passably good at trading my systems through lots and lots of repetition of exactly the same thing. I still need lots more practice. The more I practice, the more boring it gets, and the more consistently profitable it gets. Boring is good.

One thing I can assure you of - I have not looked for a new entry or examined any new patterns for well over a year now. I have entirely spent my time on perfecting what I already do now, with focus on the money management and the exit.

Basically, I think almost 100% upon minimizing my losses. The profits somehow then take care of themselves.

That has been my journey to date. Take from it what you wish. I am not interested in influencing anyone's opinion nor in any sort of macho oneupmanship. I have enough to worry about conquering my own trading demons, much less anyone else's.

 

[beamstas]

Let me clarify a few things (even though to my mind what I said was perfectly clear).

1. I have been consistently making equity peaks this year and thus consistently making my "wage" from the markets (I take my wages out whenever I reach a new equity peak). The $ value is not enough yet to completely give up my day job at this stage, but I am heading in the correct direction to do so. i.e. I can see where I'm going and I am aware of how I'm going to get there. So long as my systems continue to perform as expected I will reach my goal if they scale up as expected/planned.

i.e. I am consistently profitable at present in the current market conditions.

2. I use technical analysis to enter trades. Perhaps the more correct term is that I ABuse technical analysis to enter trades, but that's an entire thread on its own and I have no interest in giving away any of my edges.

3. I have no interest in fundamentals and very little interest in conventional technical analysis apart from using these as insights into how others think. Suffice it to say that herein lies truly profitable edges.

4. There is no technical pattern nor school of analysis, none at all, that provides ANY meaningful predictive ability whatsoever. Having said that, if by applying a form of analysis you favourably skew risk/reward in your favour, then you are getting value from your analysis (but it's NOT the entry analysis that's making the money). e.g. Resistance/support levels are not predictive, but if you use them to enter trades with favourable risk/reward (quickly admit you're wrong, let your winners run) then you will win in the long run.

The value of forgetting about finding the perfect entry and concentrating instead on trade and money management simply cannot be overemphasized, and it's this which differentiates the profitable from the masses. I have become very adept at taking small losses.

5. I have become passably good at trading my systems through lots and lots of repetition of exactly the same thing. I still need lots more practice. The more I practice, the more boring it gets, and the more consistently profitable it gets. Boring is good.

One thing I can assure you of - I have not looked for a new entry or examined any new patterns for well over a year now. I have entirely spent my time on perfecting what I already do now, with focus on the money management and the exit.

Basically, I think almost 100% upon minimizing my losses. The profits somehow then take care of themselves.

That has been my journey to date. Take from it what you wish. I am not interested in influencing anyone's opinion nor in any sort of macho oneupmanship. I have enough to worry about conquering my own trading demons, much less anyone else's.

Great post
Thanks Michael
Cleared alot of things up


Brad

 

[tech/a]

The value of forgetting about finding the perfect entry and concentrating instead on trade and money management simply cannot be overemphasized, and it's this which differentiates the profitable from the masses. I have become very adept at taking small losses

BINGO.


A chart of whatever you wish to display be that Bar or Candlestick is a symbol of crowd behaviour for that time frame.

It represents that snippet in time.
Patterns, particularly recurring patterns are a group of singular crowd behavioural events which indicate the likely reaction by the crowd to that group of events. Some see this as an edge,whether it is or not will depend on BINGO.

For those of you still bent on patterns and wish to perhaps take advantage of Michaels wisdom these thoughts of mine may help you in your application.
See Chart below.

Last line should read Price action AND volume---within the pattern

 

[tech/a]

There is your answer from me at least GG and its taken 2 points of a similar view to come to it.
Over to your T/H.