Will patterns people use for a number of years suddenly stop working or stop appearing?
Discuss.
Discuss.
Will a Technical Pattern ever stop working/appearing?
- Thread starter iamnewuser911
- Start date
define what you really means "working" first.
Patterns only exist in the past, so they never worked for making trading decisions on the hard right edge of the chart.
Charted random numbers create the same patterns as seen in the financial markets further proving the absurdity of such things.
surf
Yes, patterns will stop working when too many people are using it. Let's see Gary Smith's systems stopped working after he wrote couple manuals on what he was doing, forgot name of Fib chat service but he had huge following in 90's and guys in pit knew where orders would come in and force whipsaws back and forth till traders stopped, Curtis Arnold's PPS stopped working in 1995 cause he went from $3000 system to $29.95 book and whole world knew. I am sure their are others. I think both Kent Calhoun and Lee Gettess had their material ripped off and passed around where it didn't work as grand.
Your question is vague because you didn't define patterns but I will assume you're talking about technical analysis.
The answer is that they shouldn't stop working or start working because the issue is NOT the pattern. Its the trader that's applying the pattern. Simply, if a trader is using a pattern, he's not going to be successful because of the pattern by itself. The successful trader is using other things with the pattern.
Thus, if the trader is a good trader, he/she will adapt the overall trading plan so that the pattern can continue "working".
Another issue is those other things I mention that's used with the pattern. If there's poor discipline...the pattern isn't going to work as well resulting in poor trading results. If there's poor risk management...the pattern isn't going to work as well...resulting in poor trading results. Discipline, risk management and many other things are involved in one's trading plan...including the pattern.
Take something away from the trading plan or apply something poorly in the trading plan...the pattern will not perform well. Once again, the issue is the trader and how that trader manages his/her trading plan will determine if a pattern suddenly stop working or even keep working when others are struggling with the same pattern. This is a common issue in TA as documented by many journals here at ET...two different traders using the same pattern on the same trading instrument but both have different trade results. The fact is that each trader will apply the trading plan different than the other trader while using the exact same pattern.
As for the frequency, patterns will ALWAYS increase their frequency in appearance or decrease their frequency in appearance whenever markets change...markets always changes. It's impossible to keep the same appearance frequency every day, every week or every month. For example, if your pattern appear 8 times this month...its impossible for it to appear 8 times every month and every year...again and again. Markets are just too dynamic and will always change.
I recommend you do some simple backtesting on any pattern your using to see the above because its really an easy answer that you should have come up with by yourself via backtesting unless you don't know how to backtest...the latter would then imply you shouldn't be trading.
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Can't say about "a" particular pattern.
But much money to be made and much success to be had by "trading patterns" in general.... not all patterns, of course.... the most reliable ones. If trading patterns is not working for you, you're not doing it right.
Trading well requires a blend of TA, (patterns), psychology, and cajones.
But much money to be made and much success to be had by "trading patterns" in general.... not all patterns, of course.... the most reliable ones. If trading patterns is not working for you, you're not doing it right.
Trading well requires a blend of TA, (patterns), psychology, and cajones.
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Yes....and the pattern of buying the DJIA after 3 down days (which you are a big believer) also must never work. So I guess all the studies that your boy VN does, you know looking at PAST data are also all bs as well.
Seriously Surf, STFU with your inconsistent crap on here. If someone you idolize does it, you are a fan, but if someone else does the same thing it doesn't work.
I was going to reply , but this post by wrbtrader says it all. Great post.
Patterns do repeat time and time again. Well thought out strategies that have been back tested will continue to work. It comes down to correct execution (don't over-think when you have a set up), adjust for decent changes in volatility in your markets ( obviously guys who trade ES had to make major adjustments the last few days), and most importantly have good discipline and great risk management (Without those last 2 no strategy/pattern will work.)