Price Action VS Chart Pattern based strategies

Your success rate?

  • 70%+

    Votes: 6 54.5%

  • 50%+

    Votes: 1 9.1%

  • Less than 50%

    Votes: 4 36.4%
  • Total voters
    11
R

rajesheck

Creating a pure chart pattern based strategy is an art.

The chart has only three dimensions.
  1. Price
  2. Time
  3. Volume
Pure chart pattern based strategy must be based only on these three dimensions.

Now imagine yourself as an artist who creates a painting called strategy using the tree colors called price, time & volume.

A painter knows what is the resultant color if a set of colors mixed in a specific ratio.

For example if black and white color is mixed we will get gray color. If we mix green and yellow we may get lemon yellow color.

Similarly trader must know the relationship between the price, time and volume.

For example many traders believe that if the price floats above a particular level for a specific period then there will be explosion in price action.

If you are an expert who know the relationship between these three dimensions then you may create professional chart pattern based strategies.

Price action strategies are different from Chart pattern based strategies. price action mostly consider only the price factor.

Though price action is believed to be the best approach towards trading many struggle to make profits.

Whereas chart pattern based is a more holistic approach than price action and yields surprisingly new levels of success.

Presenting some of the wonderful chart pattern strategies here...
 
In my experience, chart patterns for short term trading are not at all useful. Chart patterns in general are a result of the human need to create visual order out of chaos, and to provide some sense of meaning and stability where there isn't any.

For short term trading, what I call "Price Patterns" is far more effective. What is current price in relation to past price levels? What is current price in relation to past DAILY highs, lows, opens, closes? Has that Price Pattern repeated? For how long, and how often? And to what results?

Nail that with even a single instrument, and you'll be on your way.
 
What Zela said...chart patterns are how we perceive price action. We all don't use named structures such as head and shoulders, triangles, wedges etc but the shape of price development is how we define and shape our edge.
 
rajesheck said:
The chart has only three dimensions.
Price
Time
Volume
Pure chart pattern based strategy must be based only on these three dimensions.
More...



I would like to add a bit more dimensions here (sharing my own experience):

4th. Market events, news flow. Markets tend to react differently on different event types.

5th. Candle % and Gap % parameters. Obviosly good mean rev. strategies can be found somwhere after 20% growth from open.

Regarding success rate, i do not trade anything less 65% win trades, with avg win>avg loss.

Using this stuff last 3 years, wors ok.
 
Xela said:
There's no "vs" about it: chart patterns are an intrinsic part of "price action". For this reason, the discussion is based on a category-error.
More...

It is the other way. Price action is a subset of chart pattern.
 
TradeFinder.net said:
I would like to add a bit more dimensions here (sharing my own experience):

4th. Market events, news flow. Markets tend to react differently on different event types.

5th. Candle % and Gap % parameters. Obviosly good mean rev. strategies can be found somwhere after 20% growth from open.

Regarding success rate, i do not trade anything less 65% win trades, with avg win>avg loss.

Using this stuff last 3 years, wors ok.
More...

Pure chart pattern strategy is a different ball game and it must be set in such a way that trader need not depend anything else outside the chart pattern.

This makes him a purely independent trader rather than depending on his fundamental analysis skills or someone who is good in it.
 
profitlocker said:
In regards to classic textbook chart patterns, that's like comparing a Lamborghini to a skateboard.
More...

I guess classic chart pattern you are referring to classic price action. They don't take time and volume into consideration and thus not a fully informed decision making pattern.
 
speedo said:
What Zela said...chart patterns are how we perceive price action. We all don't use named structures such as head and shoulders, triangles, wedges etc but the shape of price development is how we define and shape our edge.
More...

Price is primary part in the chart. Yet price alone cannot give the full picture of the market psychology. Time and volume has something to say.
 
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