Anyone tested Classic TA patterns?
- Thread starter solar
- Start date
Amazing, 2 posts in a single thread that has excellent truth. I am claiming this to be a new ET record. 
TraderZones
Registered: Mar 2008
Posts: 2594
03-07-09 07:40 PM
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Quote from intradaybill:
Good point...selection bias...it leads to a disaster if you try to trade these patterns on their own right. But using patterns in combinations and with other indicators you can remove the selection bias.
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Combining trash with other trash does not offer any value add.
A pattern/indicator/edge either works or it doesn't.
Combining 2 random things only gives you more randomness.
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2nd record shattering post:
austinp
Registered: Apr 2006
Posts: 2109
03-08-09 09:07 AM
Chart patterns work, always have and always will because they outline pure price movement. Nothing has changed since Japanese traded rice futures contracts hundreds of years ago. Computerized backtesting is the part that doesn't work.
TraderZones
Registered: Mar 2008
Posts: 2594
03-07-09 07:40 PM
--------------------------------------------------------------------------------
Quote from intradaybill:
Good point...selection bias...it leads to a disaster if you try to trade these patterns on their own right. But using patterns in combinations and with other indicators you can remove the selection bias.
--------------------------------------------------------------------------------
Combining trash with other trash does not offer any value add.
A pattern/indicator/edge either works or it doesn't.
Combining 2 random things only gives you more randomness.
......................................................................................
2nd record shattering post:
austinp
Registered: Apr 2006
Posts: 2109
03-08-09 09:07 AM
Chart patterns work, always have and always will because they outline pure price movement. Nothing has changed since Japanese traded rice futures contracts hundreds of years ago. Computerized backtesting is the part that doesn't work.
Chart patterns represent a fight between the bears and the bulls mostly representing indecision. Where this indecision is represented is even more important.
Support and resistance tests a heck of a lot better than patterns themselves but patterns at support and resistance will tell you the whole story.
You are welcome.
Susana
Support and resistance tests a heck of a lot better than patterns themselves but patterns at support and resistance will tell you the whole story.
You are welcome.
Susana
<i>"Chart patterns represent a fight between the bears and the bulls mostly representing indecision. Where this indecision is represented is even more important."</i>
Exactly right. And may I add, as the indecision resolves is where rubber meets the road. There are high-odds entry signals inside of patterns well before they break, right after they break and well after they break. Chart patterns are key reference points to measure = forecast what is likely to happen next. Most importantly from exactly where those high-odds entry points are confirmed.
Exactly right. And may I add, as the indecision resolves is where rubber meets the road. There are high-odds entry signals inside of patterns well before they break, right after they break and well after they break. Chart patterns are key reference points to measure = forecast what is likely to happen next. Most importantly from exactly where those high-odds entry points are confirmed.
A flag, pennant, wedge, coil, 1-2-3 pattern = etc is nothing more than the human decision factor at work. Until the laws of basic human nature change, chart patterns will remain constant.
Now, they will differ in exact size and shape. They will differ in exact formation to enough degree that black & white binary description into bot language cannot encompass all. Many of the high-dollar quants who were formerly overpaid at now-defunct hedge funds learned that fundamental truth the hard way. With pink slips. They'd probably admit that to you now, if they weren't so busy making sure your order of fries and a drink reach the drive-thru window fast enough.
Too many aspiring traders attempt to use computer power as a crutch to learning the skilled craft of trading. Back-testing scaled shades of gray while trying to come up with black paint will never work... it never has for long.
Susana your correct...almost.
Instead of thinking bulls & bears or support & resistance, think Supply & Demand or NO Supply & NO Demand. In a double bottom, the first is made on high volume & the second on lower...no supply. A triple is made on even lower volume, another test for supply.
BTW: A test for supply on a HL(a Flag or Pennant) after a pivot is a great low risk entry. Richard Wyckoff & Tom Williams explain the importance of volume.
Instead of thinking bulls & bears or support & resistance, think Supply & Demand or NO Supply & NO Demand. In a double bottom, the first is made on high volume & the second on lower...no supply. A triple is made on even lower volume, another test for supply.
BTW: A test for supply on a HL(a Flag or Pennant) after a pivot is a great low risk entry. Richard Wyckoff & Tom Williams explain the importance of volume.
i would put it this way:
When u learn poker or any other card game the ranking of hands is a given and fixed.
In counting/quantitive pattern trading, you must first discover how the market ranks hands by your own hard work and inquiry.
You then must continually research and monitor so that to the best of your ability, you are able to stay on top of how the market is ranking various hands, so that you can bet accordingly.
Fortunately, there does seem to be some persistance!!
When u learn poker or any other card game the ranking of hands is a given and fixed.
In counting/quantitive pattern trading, you must first discover how the market ranks hands by your own hard work and inquiry.
You then must continually research and monitor so that to the best of your ability, you are able to stay on top of how the market is ranking various hands, so that you can bet accordingly.
Fortunately, there does seem to be some persistance!!