Small Patterns versus Big Patterns

F

fervour

Hi Folks,

I was hoping to hear your experience in recogning and choosing the size of pattern (number of bars back) to take advantage of.

For example, there may be small channel patterns or trendlines within a bigger pattern such as head and shoulders, breaking of a resistance trendine vs. breaking of neckline (H&S) respectively.

Like how does one smaller pattern compliment another big pattern, vice versa or even supersede another?

Does number of bars back play a factor or may be misleading at times?

Maybe another technical indicator to affirm your decision?

I personally bottom-fish stocks that have been under the 200MA and then for look RSI levels and trend line channel patterns looking for rebound then an up-trend.

Thanks so much.
Ferovur
 
in fact you r considering patterns in different time-frames at the same time ...

imho that is correct approach

but the devil is in the details... do not expect to hear details here :)
 
qxr1011 said:
but the devil is in the details... do not expect to hear details here :)
More...

Alot of things usually...more or less...appear simple and easy on the surface :rolleyes: -- but you're right...the devil is in the details. ...
...which can be, and usually is, much more complicated :banghead::sneaky:
patek_philippe_5004_1.jpg
patek_philippe_5004_2.jpg

kind of like a fancy Swiss watch movement, -- new people, or traders, are kind of like a simpler Timex or Casio watch.
 
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fervour said:
Hi Folks,

I was hoping to hear your experience in recogning and choosing the size of pattern (number of bars back) to take advantage of.

For example, there may be small channel patterns or trendlines within a bigger pattern such as head and shoulders, breaking of a resistance trendine vs. breaking of neckline (H&S) respectively.

Like how does one smaller pattern compliment another big pattern, vice versa or even supersede another?

Does number of bars back play a factor or may be misleading at times?

Maybe another technical indicator to affirm your decision?

I personally bottom-fish stocks that have been under the 200MA and then for look RSI levels and trend line channel patterns looking for rebound then an up-trend.

Thanks so much.
Ferovur
More...

My system takes this into account with more complexity, but I can say:

Back-test/validate, and see which pattern works best. Also, I find that shorter patterns generally (not always) outperform larger patterns. I believe because larger patterns increase the degrees of freedom, or dimensionality.

https://en.wikipedia.org/wiki/Curse_of_dimensionality

I've greatly overcome this with custom algos.

Also, the optimal depth, or number of bars back, is dynamic.
 
It depends on what you're trying to accomplish. Are you clear what each part of your trading plan is accomplishing for your trading? Ie. will you buy a high RSI, or an extreme oversold RSI?

Generally speaking: Changes in price tend to propagate from the lower timeframes (tick, 1m, 5m, etc), towards the higher timeframes (1d, 1w, 1m, etc.). Clearly, a change in price can never happen on the higher timeframe first. So, your entry signal will mainly be on the shortest timeframe, with the higher timeframe as background. If you want to mix signals, you'll need to analyze how that can be accomplished so that they can complement eachother instead of weakening the other. The more signals you mix, the more they'll average out eachother. So if one signal is that much weaker or noisy, it'll break the chain of otherwise good signals.
 
fervour said:
Hi Folks,

I was hoping to hear your experience in recogning and choosing the size of pattern (number of bars back) to take advantage of.

For example, there may be small channel patterns or trendlines within a bigger pattern such as head and shoulders, breaking of a resistance trendine vs. breaking of neckline (H&S) respectively.

Like how does one smaller pattern compliment another big pattern, vice versa or even supersede another?

Does number of bars back play a factor or may be misleading at times?

Maybe another technical indicator to affirm your decision?

I personally bottom-fish stocks that have been under the 200MA and then for look RSI levels and trend line channel patterns looking for rebound then an up-trend.

Thanks so much.
Ferovur
More...

You ask good questions. This is the way of improvement !

Like how does one smaller pattern compliment another big pattern, vice versa or even supersede another?
=> Bigger pattern gives you main direction / trend. (usually, a big pattern is more than 50 bars for me, it depends...).
So 3 possibilities :
1 A small pattern gives you an opposite signal : you can exploit it ofc, for example to take profits. You wait a pullback to reenter in the main trend. But don't go south when bigger pattern / trend is north. Small virtual profits, big real losses.
2 A small pattern is correlated with the bigger pattern. This is generally a continuation signal, you should add / pyramid.
3 A small pattern could interact with a medium, which could interact with a bigger one, which could interact with a monster one.
It happens 1 / 2 times per year. Homework, preparation and trading plan should be done before it happens. If not, you would not understand what happens when it will happen (euphoria or panic). Be prepared for the battle, plan your strategy and employ tactical tools when timing is appropriate.

Does number of bars back play a factor or may be misleading at times?
=> Yes, each bar should support the next one. Better use japanese candlesticks rather than bars.

Maybe another technical indicator to affirm your decision?
=> If you master patterns and price action, you will already make money. There are others, but you don't need them now. Study and practice the basics.

I personally bottom-fish stocks that have been under the 200MA and then for look RSI levels and trend line channel patterns looking for rebound then an up-trend
=> Why not, but it is usually better to buy stocks above 200MA, or going back to or near 200 MA (or 150 MA, it depends) during a pullback : buy high, sell higher.

CM
 
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lawrence-lugar said:
Alot of things usually...more or less...appear simple and easy on the surface :rolleyes: -- but you're right...the devil is in the details. ...
...which can be, and usually is, much more complicated :banghead::sneaky:
patek_philippe_5004_1.jpg
patek_philippe_5004_2.jpg

kind of like a fancy Swiss watch movement, -- new people, or traders, are kind of like a simpler Timex or Casio watch.
More...

frankly for me anything that shows correct time is fine

the problem with clock of novices - it just does not work

the complications arise when people do not know what they are looking for: in terms of time frames one of prevailing thoughts is that bigger time frame should confirm something on the smaller ones imho that is a bullshit... :)
 
Most studies have shown that market has short memory in the order of a few days. I would not expect big patterns to carry signal, only noise. I prefer price patterns between 3 and 5 bars. Look for Michael Harris and Price Action Lab. He is a master of price patterns and has devised a number of ways to test their robustness.
 
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