Recognizable patterns, validity?
- Thread starter arky
- Start date
btw remember commisso's LGTO? it worked out beautifully.
http://www.elitetrader.com/vb/showthread.php?s=&threadid=3427&highlight=lgto
GOod example of a perfect setup.
http://www.elitetrader.com/vb/showthread.php?s=&threadid=3427&highlight=lgto
GOod example of a perfect setup.
Easy,
OK I'll stop
Jeffo,
Pretty ironic that you used the LGTO example because here is a perfect example of a failed classic pattern that exploded to other side... Take a look at the intraday chart http://www.elitetrader.com/vb/attachment.php?s=&postid=33887
you have the lil tri that can also be considered an inverted cup w/handle
Also I think Arky was referring to more of a classic pattern than a simple 3bar pullback to a confluence of support zones... I think it was more geared toward like Magee and Edwards patterns like flags, wedges, tri's, etc....
Anyway PEACE and good trading,
Commisso
OK I'll stop
Jeffo,
Pretty ironic that you used the LGTO example because here is a perfect example of a failed classic pattern that exploded to other side... Take a look at the intraday chart http://www.elitetrader.com/vb/attachment.php?s=&postid=33887
you have the lil tri that can also be considered an inverted cup w/handle
Also I think Arky was referring to more of a classic pattern than a simple 3bar pullback to a confluence of support zones... I think it was more geared toward like Magee and Edwards patterns like flags, wedges, tri's, etc....
Anyway PEACE and good trading,
Commisso
I believe that there's no pattern that work all the time. You can't just blindly buy a stock because of a pattern. You need to take into (serious) consideration the overall market conditions. I don't understand how the books can be so carelessly general about the patterns. OK, so we see a bull flag, but is it a bull flag in a market that is tanking, or rallying? What about the strength of the stock, the bias I should have, and the probability of a follow-through? Try to buy Bullish Cup and Handle pattern when Dow is -100 and falling, TRIN +3.6. Patterns are only a part of quite a sophisticated trading system.
I also believe that the more well-known or published the pattern is, the more likely it is to be manipulated by MMs (when they need to manipulate it). Imho, if Market Maker needs to unload tons of stock he will use the public knowledge of patterns to his advantage, selling into strength, or creating false breakouts, or whatever...
You can start laughing now...lol
Just my two cents
Jaba
I also believe that the more well-known or published the pattern is, the more likely it is to be manipulated by MMs (when they need to manipulate it). Imho, if Market Maker needs to unload tons of stock he will use the public knowledge of patterns to his advantage, selling into strength, or creating false breakouts, or whatever...
You can start laughing now...lol
Just my two cents
Jaba
"No matter how strong a pattern looks, it will ultimately fail more often than not if it is counter to the overall market/sector trend. You may get a slight movement in the correct direction but this will normally reverse, or at best, consolidate, if you are going against the market/sector trend.
I think a lot of people play familiar patterns without regard to the overall trend (I'm as guilty as anyone)and then lose faith in the patterns when they don't seem to work. The familiar patterns will, I believe, give a statistical advantage if traded selectively on the side of the trend."
Macal nailed it , these patterns work if they are with the over all market, and with the trend of the stock, if not, 50/50 bet.
White
I think a lot of people play familiar patterns without regard to the overall trend (I'm as guilty as anyone)and then lose faith in the patterns when they don't seem to work. The familiar patterns will, I believe, give a statistical advantage if traded selectively on the side of the trend."
Macal nailed it , these patterns work if they are with the over all market, and with the trend of the stock, if not, 50/50 bet.
White
It's really difficult to know what Mr Volume is doing. In fact TA does not tells you where the stock is going. It only give you a consistent entry and exit point. This is why a stop loss is so important in TA. If there is 1 TA method that is consistant right, the there is no need for stop loss.
Commiso-from a short term swing point of view your LGTO was a perfect pullback to a moving average with minor short term support. Of course it helped that some analyst gave it some positive news on the 7th which produced good volume, at which time I took some decent pointage from the 2nd. This was a classic pullback swing play along with some upward market sentiment, followed by a lucky analyst call as a bonus---I loved it!!
Good reminder on pattern failure 12-1 est,noticed a lot of breakout failure [noise]11-1 cst,approximately..................................Noticed,[more evident in up trends or down trends than sideways trends]how much of the price move is in the first,second hour[pattern success],that is from market open............................
Most of the replies are so close, butâ¦
From the sound of things, you guys are looking for a no-brainer Holy Grail. Even though we all know that there is no such thing.
The pattern will work provided all other pieces of the puzzle are in place. It will fail if they are not.
As mentioned previously, market and sector conditions should line up. Volume and time of day must be in your favor. Momentum and short-term oversold/overbought conditions must be in your favor. And most importantly, is there any overhead resistance waiting to throw cold water on the trade?
Patterns do not fail. Traders fail to look at the entire picture. If everything lines up, then probability is on your side. If you fail to take everything into consideration, then you are simply gambling.
To ask what patterns work best, is to acknowledge that you really do not understand the game.
The answer to the original question is: Any pattern works most of the time, provided all of the conditions favor success.
From the sound of things, you guys are looking for a no-brainer Holy Grail. Even though we all know that there is no such thing.
The pattern will work provided all other pieces of the puzzle are in place. It will fail if they are not.
As mentioned previously, market and sector conditions should line up. Volume and time of day must be in your favor. Momentum and short-term oversold/overbought conditions must be in your favor. And most importantly, is there any overhead resistance waiting to throw cold water on the trade?
Patterns do not fail. Traders fail to look at the entire picture. If everything lines up, then probability is on your side. If you fail to take everything into consideration, then you are simply gambling.
To ask what patterns work best, is to acknowledge that you really do not understand the game.
The answer to the original question is: Any pattern works most of the time, provided all of the conditions favor success.