Classic Geometric Patterns and Narrow Range Setups
- Thread starter inandlong
- Start date
Post from Salzburg:
Low Hisvol
Thanks, inandlong, I had a hunch that's where you might be coming from -- the low hisvol environment, that is. When those ratios (6/100, or 7/90, whatever) fall below .6 things are getting pretty quiet!! It's a good time for delta neutral strategies and stuff as I recall -- but itâs been a while since I looked into it.
âI am looking at scanning for the last two days to be inside days. You see this pattern all the time, usually historically, and you see those neat little 3 bar triangles then boom a nice break for the day.â
Right. The double inside day. Iâve seen it under the name of the âShark Pattern.â But I never thought of requiring the âSharkâ to set up in a low hisvol environment. Hmmm . . . that might increase the % winners to some degree, since you were talking about that.
âI like the idea of requiring the inside day to be a smaller percentage of the ATR, or at least limiting the size of the inside day I am will to trade off of.â
Strongly agree: an ATR contraction under the right circumstances can be a wonderful thing.
Thank you again for the generous response. And if you do track the set ups and the occurrence of outside days for the next two weeks, it would be terrific if youâd share your observations, even in very general terms.
Low Hisvol
Thanks, inandlong, I had a hunch that's where you might be coming from -- the low hisvol environment, that is. When those ratios (6/100, or 7/90, whatever) fall below .6 things are getting pretty quiet!! It's a good time for delta neutral strategies and stuff as I recall -- but itâs been a while since I looked into it.
âI am looking at scanning for the last two days to be inside days. You see this pattern all the time, usually historically, and you see those neat little 3 bar triangles then boom a nice break for the day.â
Right. The double inside day. Iâve seen it under the name of the âShark Pattern.â But I never thought of requiring the âSharkâ to set up in a low hisvol environment. Hmmm . . . that might increase the % winners to some degree, since you were talking about that.
âI like the idea of requiring the inside day to be a smaller percentage of the ATR, or at least limiting the size of the inside day I am will to trade off of.â
Strongly agree: an ATR contraction under the right circumstances can be a wonderful thing.
Thank you again for the generous response. And if you do track the set ups and the occurrence of outside days for the next two weeks, it would be terrific if youâd share your observations, even in very general terms.
Post from inandlong:
I'm scanning for today's NR7/ID candidates now. I'll check those against the volatility filter and post a bunch of the symbols. I'll also post some of the 2 inside day symbols. As you might imagine, many of those will qualify as NR4/ID's and perhaps some 7's too.
Thanks for your help and input, I really appreciate it.
I'm scanning for today's NR7/ID candidates now. I'll check those against the volatility filter and post a bunch of the symbols. I'll also post some of the 2 inside day symbols. As you might imagine, many of those will qualify as NR4/ID's and perhaps some 7's too.
Thanks for your help and input, I really appreciate it.
Here are some of the NR7/ID candidates for Monday. Those with *'s qualify as low recent volatility per the Volatility Ratio. Also, I use QCharts so data integrity is always in question.
And by definition, all of the NR7/ID candidates are NR4/ID candidates too. There are more 4's, but not many more.
Try filtering these further with ATR% limits, risk limits, directional limits, etc. You might also put up the 20, 50, and 200 sma's since these are very popular averages. A candidate that breaks down right on top of one of these averages might not work out as well as one that breaks out.
AZN* BBT* BDX* FCS* FRX* HLT* MOT*
DIA DOW S NAV NYT MET SPY
Also, all three major indices were candidates Friday.
And by definition, all of the NR7/ID candidates are NR4/ID candidates too. There are more 4's, but not many more.
Try filtering these further with ATR% limits, risk limits, directional limits, etc. You might also put up the 20, 50, and 200 sma's since these are very popular averages. A candidate that breaks down right on top of one of these averages might not work out as well as one that breaks out.
AZN* BBT* BDX* FCS* FRX* HLT* MOT*
DIA DOW S NAV NYT MET SPY
Also, all three major indices were candidates Friday.
Thanks for the question.
These posts are copied from the So these Patterns Work thread under the Technical Analysis forum. I cannot split a thread in that forum, and as I said there that I would start a thread here on the topic posted, I copied the related posts to this thread. It provides a continuum in the discussion. My last post is a follow-up to what I said I would do re: posting some specific examples of the setup for those interested to follow as we investigate this trade together.
These posts are copied from the So these Patterns Work thread under the Technical Analysis forum. I cannot split a thread in that forum, and as I said there that I would start a thread here on the topic posted, I copied the related posts to this thread. It provides a continuum in the discussion. My last post is a follow-up to what I said I would do re: posting some specific examples of the setup for those interested to follow as we investigate this trade together.
An updated pattern as I have it drawn for today. As I mentioned earlier, the classic break of a pattern is 1/2 to 2/3 of the way thru. This pattern is 15 bars wide, today is bar 10. 10/15 = 2/3. So let's just watch what happens. Volume is weak, and volume is an important clue about the success of a pattern break.
I want to review how some of these turned out so far. Again, for me, I have always looked at this trade as a daytrade. I have never optimized what a good profit target might be. What I have noticed is that many will provide at least a 30 cent profit opportunity. How that might fit in to the whole thing we can discuss.
First, we were fortunate that the indices complied with the expected. A term that comes from this setup is the trend day. Clearly yesterday was that. The trend day is exactly what this setup is supposed to imply. This time it worked out which is good because it gives us some examples to look at.
I decided Sunday to put up the DMI's and papertrade only in the direction indicated by the indicator. Most of the time the trade and the DMI's coincided yesterday. Sometimes it didn't. Some of the ones that didn't resulted in missed profits, and some resulted in missed losses. Whether or not it works to the trader's benefit is an opportunity for a stat study that I won't do.
AZN is an example of a long trade not taken because of a short DMI.
BBY worked out very well.
BDX is an excellent example of making sure you look at the trade carefully. At first glance it is an outside day, and the trader chalks up a whipsaw. Au contraire mes amis!
The stock gapped open about 40 cents higher. I don't know about you, but me, I move on to the next trade because I am looking for a breakout, not a gap out. The DMI had me biased long on this one, but just to point out there was profit to be had when the stock sold off, and took out the NRID low. Anyway, the point is, while this was an outside day, in my view, there was only a profit opportunity on the short side, and no long loss.MOT is the final one I want to mention. I think it is important to remember that almost always you are going to be required with any method to employ some subjectivity. This is why it is important to have experience working with the tools of our trade, which includes your risk management. The range of the MOT NRID day was 25 cents. Adding 7 cents to each end for entry and stoploss, and the risk on the trade was 39 cents, not including slippage and commissions. A long entry at 13.05 gave you a profit max of 35 cents, or almost a 1:1 risk:reward ratio. One of the maxims is, don't let a winner turn into a loser. This case applies. The stock sold all the way back thru the entry, thru the open, and closed below the open, altho up for the day. The cost of doing biz these days is so cheap that not to scratch this trade, or get out at scratch plus commish is silly.
