It's the Pattern, Stupid!

benwm said:
Whilst that might be true, we might as well as close down ET if everything has already been discussed and decided. One drawback of historical threads is that a lot of the posters have left. What if you have a question for one of these experts that have left ET? Or maybe a new insight? Even the present day resident ET experts will only leave tidbits of advice before remarking that you can't find the answers in books or all of the hard work needs to be done by yourself, not copying others. I personally don't see any harm in revisiting the topic.

Having said that, I do agree with a lot of your post...patterns need to be viewed in context, they are only a small piece of the puzzle, etc...
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I too see no harm in revisiting the topic unless the revisiting is vague without any reference to a prior topic that's more detailed with education content in ET's Hall of Fame threads.

Yeah, if you want to view ET as the only place on the planet...it will be a drawback to read info from a member that is no longer at ET as typically seen in those historical threads. Yet, reality, there's enough information to easily do research on Google to answer any new question related to today's markets in comparison that can not be found here in one of those Hall of Fame threads involving markets in the past.

Simply, the ability to research about anything mentioned at this forum is a key aspect of trading.

Therefore, my purpose about mentioning the Hall of Fame threads is so that someone talking about a specific pattern in this thread will do a little research and link it to a prior thread that has more in depth discussion to prevent this "revisiting" from seeming like a vague discussion. I believe that's what schizo is trying to do...have an in depth discussion about a pattern beyond just showing a generic chart with a name.

Also, I just wanted to make sure that readers understand that successful trading do not only involve patterns and nothing else. Yet, I understand that it would be strange to be discussing in depth details about risk management or psychology in a thread about patterns when those specific topics can have their own discussions elsewhere here at the forum. :)

Just the same, it would be strange to have a specific thread about risk management or discipline and some show up to talk about patterns. :eek:
 
wrbtrader said:
I truly believe you need different price actions for different types of market conditions to contrast the belief you only need an entry and exit. Simply, you can't apply a pattern to all types of different market conditions as if one size fits all because many patterns are only suitable for a certain type of market conditions.
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1) For the sake of simplicity, let me state that you can exit your trade when the pattern fails to materialize.

2) True, not all patterns will work on every futures and equity markets. But they all, for the most part, tend to show that certain patterns like Double Top or Double Bottom will work everytime. However, being able to spot these patterns in real time is the essence.

3) Nevertheless, one should always adhere to the principle of risk management. :)
 
wrbtrader said:
Therefore, my purpose about mentioning the Hall of Fame threads is so that someone talking about a specific pattern in this thread will do a little research and link it to a prior thread that has more in depth discussion to prevent this "revisiting" from seeming like a vague discussion. :eek:
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Yeah, I suppose you are right. There is a danger that this becomes a vague discussion. I was thinking maybe it might throw up a few patterns/indicators not seen before to generate some ideas for testing. But maybe schizo can provide more detail what he's aiming for (with some examples) and then we can proceed from there.
 
benwm said:
Here's a variation on learner2007's Dow Theory Reversal Pattern:-
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This one is new to me. However, I think it warrants some context. We don't know where it's coming from. Is this the bottom or the top? Perhaps it's smack in the middle of nowhere.

Here's my own explanation.

We can perhaps divide the pattern into two parts. On the left, we have a rising flag formation followed by what appears to be a retarded looking double bottom. The rising flag formation, according to the textbook, is actually bearish. Hence, the breakout to the downside. The retarded looking DB, with the lower 2nd low, which at first looks ominous, turns out to be bullish when the damn price penetrates above the previous swing high.
 
benwm said:
Yeah, I suppose you are right. There is a danger that this becomes a vague discussion. I was thinking maybe it might throw up a few patterns/indicators not seen before to generate some ideas for testing. But maybe schizo can provide more detail what he's aiming for (with some examples) and then we can proceed from there.
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What, you want me to start another thread on "risk management"? :)

It's my hope to get the creative juice flowing, you know, start having discussions about the meat of trading. That is, when is it optimal time to enter and exit trades? Because no matter how great your understanding of risk management might be, if you can't enter and exit at the proper time, you will always underperform.
 
wrbtrader said:
Therefore, my purpose about mentioning the Hall of Fame threads is so that someone talking about a specific pattern in this thread will do a little research and link it to a prior thread that has more in depth discussion to prevent this "revisiting" from seeming like a vague discussion. I believe that's what schizo is trying to do...have an in depth discussion about a pattern beyond just showing a generic chart with a name.
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You're welcome to mention or link any HOF of your choice. Heck, I even wrote one under another handle. But the real gist of this thread is, like you wrote, to have an in-depth discussion. I do want folks to contribute more than just a chart with a name.

Tell us why patterns occur because we know prices don't just move in random. Tell us the market psychology behind the pattern. Why the bulls are doing this and why the bears are reacting likewise. It would also be nice to have some empirical evidence from those who are into backtests/walk-forward/In-sample/OOS/optimization and what-not.
 
schizo said:
This one is new to me. However, I think it warrants some context. We don't know where it's coming from. Is this the bottom or the top? Perhaps it's smack in the middle of nowhere...
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The context involving Dow Theory @ Dow Theorists @ https://en.wikipedia.org/wiki/Dow_theory

Simply, the context is that you can not use Dow Theory by looking at one chart only. There are lots of components needed (required) for that context. Its also an investing tool or position trading tool (holding positions longer than several weeks) but very difficult to use as a day trading tool due to the fact the typical day trader will ignore the key components of Dow Theory.

Therefore, the context is that to use Dow Theory properly...you're going need to discuss the economics, fundamentals, market comparisons, volume involving the charts. There is an in depth discussion about this within one of the Hall of Fame threads by someone that said he worked as an economist...he went into great detailed in one of those threads about another topic...I can't remember the link. Yet, link is not needed considering its a very easy researched topic on Google and Youtube videos.
 
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benwm said:
t's not exactly the same pattern...but S&P 500 top formation in 2007-8 is similar to the corkscrew:-
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Your corkscrew pattern occurred just now in the Nikkei on a 50 tick chart. Actually there is a name for it. Somebody, I think it was Hill, called it '3 moves to a top/bottom'.
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