PPS Trading System by Curtis Arnold

[bunyip]

Along with an oscillator for a basic idea of overbrought/oversold and a moving average for the basic trend and especially shooting stars and hammers for trend reversals

Hammers and Shooting Stars are unreliable as trend reversal signals. That's not to say that you can't find examples of a trend reversing after the appearance of one of these candles. But they're far more reliable when used as trend continuation patterns.

Examples.......

1. A downtrending market rallies as buyers pile in and push prices up.
But the upward push soon fizzles out, and a Shooting Star shows up. The long upper tail of the Shooting Star shows where the buyers have been flushed out and higher prices have been rejected. The low close of the SS shows that the bears are back in control.
The downtrend is about to resume.

2. An uptrending market sells off as profit takers bail out. The selloff proves to be only temporary, and a Hammer shows up. The long lower tail and the high close of the Hammer show where the sellers have been flushed out and the buyers are piling back in to take advantage of the cheaper prices.
The bulls have regained control and the uptrend is about to resume.

The above examples are one of the strategies I use to trade Forex from end of day charts. It's a simple system and very profitable.

Hammers and Shooting Stars can add additional reliability to the patterns used in the PPS system. When found within a triangle, they increase the probability of the triangle breaking out in the direction of the trend.

Similarly, when a Hammer forms the second bottom of a double bottom within an uptrend, it increases the likelihood of the uptrend resuming.

When a Shooting Star forms the second top of a double top within a downtrend, it increases the probability of the downtrend resuming strongly.

 

[WaySolid]

A link to a free Curtis Arnold seminar with notes.
http://tinyurl.com/6j52g6

Apologies if linked to before.

Excellent site there btw, a nice free resource for previews to their pay section.

 

[MRC & Co]

Hammers and Shooting Stars are unreliable as trend reversal signals. That's not to say that you can't find examples of a trend reversing after the appearance of one of these candles. But they're far more reliable when used as trend continuation patterns.

Yes, they can also be used in this fashion.

Sometimes I will use them after only a several bar move. Not neccissarily a reversal of a larger trend.

But of a larger term trend, a shooting star or a hammer on large exhautive volume, are not unreliable IMO. But it HAS to be paired with that large volume. If the tail hits a resistance or support or closes a previous gap, I will take them without second thought.

 

[mazzatelli1000]

Hammers and Shooting Stars are unreliable as trend reversal signals. That's not to say that you can't find examples of a trend reversing after the appearance of one of these candles. But they're far more reliable when used as trend continuation patterns.

The appearance of Hammers often only signal that the preceding trend has stopped and taking a rest - whether it will continue, or reverse is left to be seen.

So I agree alone as a reversal signal is unreliable

 

[tech/a]

but a number setting up on the short side now:

You know this how?

 

[bunyip]

Someone was asking if PPS works across different markets.
I've used it for trading commodity Futures like Soybeans, Corn, Cotton, Lean Hogs, options on US stocks, CFD's on ASX and US stocks, and also to trade Indexes.
These days it's one of my Forex trading strategies.
And I've used it across a variety of timeframes, daily, weekly and intraday.
The chart below shows a classic PPS setup in the Forex market.

Note the Hammers at Points 2 & 4.....when candle bottom reversal patterns appear at the bottom of a triangle they add even more weight to the probability of an upside breakout.

 

[julius]

You know this how?

Tech - think Nick means a number of trades setting up on the short side...could be wrong of course.

 

[tech/a]

Tech - think Nick means a number of trades setting up on the short side...could be wrong of course.

I also think thats what he means.
How does/did he discover this?

 

[MRC & Co]

I also think thats what he means.
How does/did he discover this?

lol, tech, I think both Julius and Nick are stating a number of PPS style (Power set-up) trades setting up on the short side now.

Nothing to do with traders setting up on the short side on BOL inparticular.

 

[tech/a]

Oh.
Thanks for that I was madly looking for a reason to sell my only profitable trade at the moment--BOL.

 

[bunyip]

Oh.
Thanks for that I was madly looking for a reason to sell my only profitable trade at the moment--BOL.

I'm curious...why would you be looking for a reason to sell a profitable stock that's still uptrending? Why not just trail your stop with the aim staying in for the duration of its trend?

 

[tech/a]

Radge said in his post about BOL

but a number setting up on the short side now:

I incorrectly thought his comments were related specifically to the trade on BOL.

Thanks for your trading hints.
After 14 yrs in this game I'm always looking for fresh ideas.

 

[bunyip]

This Forex chart shows another of the patterns from Curtis Arnolds PPS trading system.
Curtis developed his PPS (Pattern Probability System) after reading some of the classic texts on technical analysis, and questioning the truth of some of the claims being made about the various chart patterns.
He conducted extensive testing to prove or disprove the validity of these claims.
One of his findings was that Double Tops were most reliable when used as downtrend continuation patterns, rather than as uptrend reversal patterns.

Although Double Tops during downtrends are less common than triangles during downtrends, they're nevertheless good patterns that are frequently followed by powerful moves in the direction of the trend.

 

[MRC & Co]

Not sure if you have read "Adaptive Analysis" yet Bunyip, but if not, as Nick is a big fan of PPS, he shows set-ups along similar lines.

Micro double bottoms/tops as trend continuation patterns.

Thanks for the charts and examples.

 

[bunyip]

Not sure if you have read "Adaptive Analysis" yet Bunyip, but if not, as Nick is a big fan of PPS, he shows set-ups along similar lines.

Micro double bottoms/tops as trend continuation patterns.

Thanks for the charts and examples.

No MRC.....'Adaptive Analysis' is not among the 50 odd books trading books in my library.

The good thing about these patterns is that they appear in every market and in every timeframe. So no matter which market/s you choose to trade, you have a simple and profitable trading system available to pull consistent profits from that market.

You can look at charts going back to near the turn of the last century and every year in between - stocks, futures or whatever - and you'll see these very same patterns staring out at you. The price movements that cause them are caused by human nature, and human nature never changes. Therefore we can be assured of having a continued supply of these patterns right throughout our trading lives.

I'm always perplexed by people who say the markets are changing, and you have to change with them by constantly adapting your trading system and having a dozen different strategies to use in different market conditions.
What nonsense....my trading strategies have remained pretty much unchanged for 10 years and in that time we've seen a variety of market conditions from bearish to bullish to flat. I've never yet seen market conditions in which I was starved of profitable trading opportunities.
If you can find a trend you can find a profitable trading opportunity........and even during flat market there are always stocks that trend. Always.
Better still, if you go a market like Forex there's rarely a time when you don't have some currencies trending strongly.

 

[It's Snake Pliskin]

No MRC.....'Adaptive Analysis' is not among the 50 odd books trading books in my library.

The good thing about these patterns is that they appear in every market and in every timeframe. So no matter which market/s you choose to trade, you have a simple and profitable trading system available to pull consistent profits from that market.

You can look at charts going back to near the turn of the last century and every year in between - stocks, futures or whatever - and you'll see these very same patterns staring out at you. The price movements that cause them are caused by human nature, and human nature never changes. Therefore we can be assured of having a continued supply of these patterns right throughout our trading lives.

I'm always perplexed by people who say the markets are changing, and you have to change with them by constantly adapting your trading system and having a dozen different strategies to use in different market conditions.
What nonsense....my trading strategies have remained pretty much unchanged for 10 years and in that time we've seen a variety of market conditions from bearish to bullish to flat. I've never yet seen market conditions in which I was starved of profitable trading opportunities.
If you can find a trend you can find a profitable trading opportunity........and even during flat market there are always stocks that trend. Always.
Better still, if you go a market like Forex there's rarely a time when you don't have some currencies trending strongly.

Hi Bunyip,

Thanks for the PPS information. I have tried to get that book without any luck. So bit by bit I get some information here and there.

Cheers.

 

[bunyip]

Hi Bunyip,

Thanks for the PPS information. I have tried to get that book without any luck. So bit by bit I get some information here and there.

Cheers.

No problem Snake - pleased to help.
Bought my PPS book from traderslibrary.com ten years ago. Just visisted their website and it says the book is not available. Maybe it's gone out of print.

 

[lesm]

Thanks for the PPS information. I have tried to get that book without any luck. So bit by bit I get some information here and there.

Cheers.

Hi snake,

There are two used copies available on Amazon.

Cheers.

 

[MRC & Co]

Better still, if you go a market like Forex there's rarely a time when you don't have some currencies trending strongly.

Yeh, this seems to be a recurring theme I am hearing. I don't trade FOREX myself, but every single trader seems to talk about how well it responds to traditional T/A set-ups.

Snake, I have found it impossible to land PPS too. I saw 2nd hand copies on Amazon, but none ship to Australia. I even messaged some of the people asking if they could do a deal and I would pay for shipment, no reply from any of them, ha ha.

I will get my hands on it one day. For now, I will have to learn from threads like this and examples like Bunyip and Nick provide.

Bunyip, does Arnold also look at adding candle signals to these micro-patters such as you do yourself? And how often do you find confluence between candle reversal signals and micro traditional patterns?

 

[bunyip]

Yeh, this seems to be a recurring theme I am hearing. I don't trade FOREX myself, but every single trader seems to talk about how well it responds to traditional T/A set-ups.

Snake, I have found it impossible to land PPS too. I saw 2nd hand copies on Amazon, but none ship to Australia. I even messaged some of the people asking if they could do a deal and I would pay for shipment, no reply from any of them, ha ha.

I will get my hands on it one day. For now, I will have to learn from threads like this and examples like Bunyip and Nick provide.

Bunyip, does Arnold also look at adding candle signals to these micro-patters such as you do yourself? And how often do you find confluence between candle reversal signals and micro traditional patterns?

Yep, Forex seems to be tailor made for technical analysis. And it puts in the sort of trends that traders dream about.
Not only that, but the sheer size of the Forex market makes it very difficult to manipulate. There are many other benefits of this great market, but I'm somewhat off topic so maybe I'll talk more about it over on one of the Forex threads.

I'm not sure Curtis A had even heard of Japanese Candlestick charts when he wrote the PPS book......he never once mentioned them.

Hard to quantify how often candle reversal signals accompany the PPS patterns...but it's quite a common occurrence.

The chart below shows a Descending Triangle in a downtrending Forex pair.
I like this pattern as a short entry signal in Forex and I've had some nice trades from it.
But interestingly, Curtis Arnold doesn't seem too keen on this pattern in the commodity futures markets in which he tested it.