thoughts on harmonic patterns?

[spectastic]

I am skeptical. that's why I'm here. But I'm also skeptical of skeptics who claim something sucks when they haven't tried it.

https://harmonictrader.com/

here's the website. I'm not sure if the book is still free, might have been a one time thing. I can share a google doc when I get home later.

 

[easymon1]

I went through the website and didn't find a lot of useful information. Generally speaking, everything peddled to retail investors/traders is fake. In the institutional world, when a bank or asset manager has a new strategy, it typically is documented with a significant level of detail so that people can backtest the strategy. When they do this, they will explain why they are sharing it as well -- because some sources of alpha are longer lasting than others. Most of their good ideas are not shared unless it's purely an agency desk (as is the case for most equities).

Most sources of alpha are capacity constrained or time-varying, which means that they don't work if there's too much money chasing it, or they work sometimes but not others.

What actionable information for the average user of ET is in that nugget?

 

[spectastic]

probably more useful in gaining insight on his process.

 

[ph1l]

What is the Title?
Where is this tome housed? Where may we take a look?

"The Harmonic Trader"
https://harmonictrader.com/wp-content/uploads/2019/11/theht.pdf

"Harmonic Trading: Volume One"
https://harmonictrader.com/wp-content/uploads/2020/04/vol1.pdf

"Harmonic Trading: Volume Two"
https://harmonictrader.com/wp-content/uploads/2020/04/htvol2.pdf

"Harmonic Trading: Volume Three Reaction vs. Reversal"
https://harmonictrader.com/wp-content/uploads/2020/06/HarmonicTradingV3Carney.pdf

 

[longandshort]

What actionable information for the average user of ET is in that nugget?

Literally none. The stuff an average ET'er can trade are things like momentum and reversals, and for both of those, simplicity is key. Momentum should be measured as the slope of change in the stock price, while reversals are providing liquidity against the market move.

A smart ET'er spends 5 minutes in the morning to review macro data (if any), bond market stuff (yields and moves), volatility (vix and 9d), and market breadth (adv / dec). But the trading opportunities are really found in scanning for stocks that are top movers (up or down) at open, reviewing news on the stock and volume, and then making a trade either to capture momentum or a reversal.

When a stock is spiking up or down, you need to know why and figure out what you estimate fair value to be. Note: you cannot predict the eod close with just your time series data, but you can think about where volume will be in through the day (Average volume at time historically).

For example:

If momentum is the slope of the ROC then you would buy when ROC is accelerating and sell as it decelerates and goes negative (the opposite is true for shorting). Don't stare at the price chart.

 

[spectastic]

Literally none. The stuff an average ET'er can trade are things like momentum and reversals, and for both of those, simplicity is key. Momentum should be measured as the slope of change in the stock price, while reversals are providing liquidity against the market move.

A smart ET'er spends 5 minutes in the morning to review macro data (if any), bond market stuff (yields and moves), volatility (vix and 9d), and market breadth (adv / dec). But the trading opportunities are really found in scanning for stocks that are top movers (up or down) at open, reviewing news on the stock and volume, and then making a trade either to capture momentum or a reversal.

When a stock is spiking up or down, you need to know why and figure out what you estimate fair value to be. Note: you cannot predict the eod close with just your time series data, but you can think about where volume will be in through the day (Average volume at time historically).

For example:
View attachment 262924
If momentum is the slope of the ROC then you would buy when ROC is accelerating and sell as it decelerates and goes negative (the opposite is true for shorting). Don't stare at the price chart.

I agree most people posting videos about stocks on youtube are either scammers or idiots looking for validation. But there are also some old floor traders who seem like they know their stuff (like peter brandt), and a lot of them say the same things, like KISS.

Deviating from the original thread a bit, where do you think retail traders typically find edge? Is it from spending a lot of time looking at charts and knowing how certain tickers behave, risk management, execution, handling wins/losses psychologically, following rules and being disciplined, combination of the above, or something else?

And what would be an example of a trading strategy or idea that say a prop firm might use, since that's the closest institution to retail trading.

 

[longandshort]

I agree most people posting videos about stocks on youtube are either scammers or idiots looking for validation. But there are also some old floor traders who seem like they know their stuff (like peter brandt), and a lot of them say the same things, like KISS.

Deviating from the original thread a bit, where do you think retail traders typically find edge? Is it from spending a lot of time looking at charts and knowing how certain tickers behave, risk management, execution, handling wins/losses psychologically, following rules and being disciplined, combination of the above, or something else?

And what would be an example of a trading strategy or idea that say a prop firm might use, since that's the closest institution to retail trading.

The only real edge you have as a retail trader is that you can fill quickly once you’ve made a decision. That’s a logistical edge. Charts, patterns, etc., are not going to help at all. Top traders should be looking at a win rate of 55-60%. You should avoid factor and beta risk and instead focus on more idiosyncratic plays. If you are day trading, that means you can only really trade intraday momentum or reversals -- which again, are more about the slope of ROC than a chart or pattern. If you are a "swing trader", rebrand yourself as a "catalyst trader" and focus on events on the calendar -- such as corporation actions, spin offs, divestitures, odd lot buyouts, m&a arb spreads, earnings, and other big events. You need to become very well versed on how to analyze those trades, which needs about a week of training (read a corporate finance textbook and learn how to put together an earnings waterfall or sum-of-the-parts analysis).

 

[easymon1]

What actionable information for the average user of ET is in that nugget?

I went through the website and didn't find a lot of useful information. Generally speaking, everything peddled to retail investors/traders is fake. In the institutional world, when a bank or asset manager has a new strategy, it typically is documented with a significant level of detail so that people can backtest the strategy. When they do this, they will explain why they are sharing it as well -- because some sources of alpha are longer lasting than others. Most of their good ideas are not shared unless it's purely an agency desk (as is the case for most equities).

Most sources of alpha are capacity constrained or time-varying, which means that they don't work if there's too much money chasing it, or they work sometimes but not others.

What triggers a buy or a sell to open?
What triggers an exit?
How do you size your trades?

The actionable information that jumps out is highlighted above.
Again longandshort, we are saying essentially the same thing.

The principles of creating and maintaining a tested setup are not a big mystery.
They are a lot of work.

Everybody has a shortcut, a better way, a friend with a strategy, something they read about, or they might be Just THAAAAAAAAT close to "Getting IT" and maybe they won't have to do any stats, hope and pray, lol.

Or they have a method that does not need to be written down with clearcut instructions.
This is not the topic of this exchange, and I've yet to see any such specific method detailed in any way shape of form here, so set aside a decade or two for THAT tortuous"Backtest". Even the practitioners of this method will tell you to gird your loins and be prepared for The Long Haul.

So we are in congruence on this non-issue.

What triggers a buy or a sell to open?
What triggers an exit?
How do you size your trades?
|
it typically is documented with a significant level of detail so that people can backtest the strategy.

 

[easymon1]

I am skeptical. that's why I'm here. But I'm also skeptical of skeptics who claim something sucks when they haven't tried it.

https://harmonictrader.com/

here's the website. I'm not sure if the book is still free, might have been a one time thing. I can share a google doc when I get home later.

Search - Harmonic patterns such as the Bat pattern, the Gartley pattern, the 5-0, the Shark, the Crab pattern - Search
https://duckduckgo.com/?q=Harmonic+patterns+the+Bat+pattern,+the+Gartley+pattern,+the+5-0,+the+Shark,+the+Crab+pattern

 

[maxinger]

I am skeptical. that's why I'm here. But I'm also skeptical of skeptics who claim something sucks when they haven't tried it.

https://harmonictrader.com/

here's the website. I'm not sure if the book is still free, might have been a one time thing. I can share a google doc when I get home later.

you should go and evaluate it for yourself.
Don't believe what the books say. don't believe what people say.