Quote from bwolinsky:
I only believe in price physics, pairs trading, and statistical arbitrage. Double head and shoulders patterns and head and shoulders patterns themserlves only predict falls because the last leg is always a lower hi, but where that stops is that people assume that they had to identify a left shoulder followed by a 1st and 2nd right shoulder when it is by price physics that that pattern will predict moves down.
The resistance ranges are set by markets, not patterns, and there is no case wherein price physics doesn't work out on the second lower high because if you're saying second head and shoulders patterns are faith based, it's that the market is signaling a top is in, but don't call it a head and shoulders or double head and shoulders, call it what it is, which is a lower high. There are ways to define these quantitatively without the typical technical analysis garbage that is those patterns.
Some ones I have seen lately including "rising wedge", symetrical triangle (also a form of rising wedge), and an sma where concavity is greater than 0 and a bottom is in place. These don't work well enough to tell you when to put on the trade, but price physics does. Pairs Trading does, but statistical arbitrage is just that, a daily occurrence where you can bet the direction of the market if it is projected that way large enough.
If you try to code any of those technical analysis patterns, you'll find they don't work. Double head and shoulders work better than single head and shoulders because you have two confirmations of lower highs whereas a single head and shoulders only has one that could be after a breach from a higher low that when you are sure of your first shoulder pattern you put the trade on just to watch it rise, even though usually waiting for such patterns is typically what leads to trader underperformance.
