What is your most profitable pattern?

[Liquid validity]

It is all in your imagination , all these patterns can be found in random prices charts as well , that must tell you something , the random line is different than a coin toss , it is based on the idea that a certain level wont be a turning point , so basically you are trading with momentum .

To a certain extent I agree with that.
Markets are not a pure random walk.
There are times when they can be,
and times when they certainly are anything but.

As far as typical chart patterns go, I entirely agree,
not much different to seeing faces in clouds etc.
Patterns: The Need for Order | Psych Central
Patternicity: Finding Meaningful Patterns in Meaningless Noise: Scientific American

 

[tar]

To a certain extent I agree with that.
Markets are not a pure random walk.
There are times when they can be,
and times when they certainly are anything but.

As far as typical chart patterns go, I entirely agree,
not much different to seeing faces in clouds etc.
Patterns: The Need for Order | Psych Central
Patternicity: Finding Meaningful Patterns in Meaningless Noise: Scientific American

BTW i didn't mean markets are random , although markets noise is random . Re the random line , it is not really random , you are just drawing a line for your comfort zone ( at that point i will join momentum ) , joining momentum is a great strategy , but you don't want to chase it all over the place = emotions will take over and you will get chopped to death by over trading it , i guess that's the idea of drawing a line "self control" .

 

[Liquid validity]

BTW i didn't mean markets are random , although markets noise is random

lol, it OK I know what you meant, I wasn't necessarily disagreeing.
Just saying the are markets random / not random question
is simplistic if applied all the time, to all conditions.

People have different motives at times, other times a common motive is shared.
A supermarket is a good analogy.
People walk in with their own far from random objectives.
They know where they are going.
That may change if the price is not right, or no stock (lack of liquidity).
To an outside observer, each individuals movements are essentially random.

Now a fire breaks out - the path and motive of each individual is now
pretty much a dead cert - make for the exit.
Even then, randomness exerts itself, some will get trampled in the stampede.
Overall though, this situation is far from random.

Financial markets are no different really.
Thats why people tend to disagree on the subject.
Those that sit on their hands waiting for the fire situations,
and those (I'm one of them) who focus on the more general randomness.

If I had to say which is more effective and efficient, its the fire breakout.
For me the random side is more stable and consistent, although I'm willing to
concede that may be a product of my own inability to program something that
sits on its hands or do it myself.
Its suits me personally, and thats all that matters - individual suitability.

 

[barjon]

The concept of the coin toss entry or randomly throwing yourself in at the deep end and managing your way out of a trade being more important than finding a good entry point seems a popular one with the more experienced traders. I’ll be delighted to eventually arrive at that same conclusion, but right now, I can’t see the point of letting go of the other edge we potentially possess, that of finding an entry point that more likely than not supports our intended trade for both value of entry level and potential momentum to carry us to target, or at least profit.

The best traders I know are constantly on the look out for momentum and if they use chart patterns at all, it is only as indications of where momentum might come in. Their edge is not in the pattern, but in their early appreciation of building momentum and in their appreciation of it falling off. In general, they are not in the business of looking for home runs and they play the bursts of momentum for as long as they last.

I suppose I'd describe them as in the "buy high, sell higher" camp which does not seem to attract newcomers half as much as the "buy low, sell high" camp who appear to throw themselves in front of the momentum freight train all too often.

 

[bbmac]

Thanks mate,...I love the simplicity of it....but I doubt that anyone has / is willing to show if they do - any empirical evidence that it actually represents a consistently profitable edge over time, let alone the rule set that constitutes the edge around that basic concept (like for eg where do they actually draw the line.)

This illustrates the point I was making in my 1st post on this thread - too often these 'patterns' are generic and anecdotal - ie there is no point trading such a pattern as listed in the poll associated with this thread for eg (and for 'pattern' read any repeating set of circumstances) unless you know empirically that there is an edge to be had from it and that you can turn this into a profit for yourself - from your own trading of such (a la the ' profit gap.') For me - I don't trade the patterns listed in the poll so I have no idea whether there is an edge to be had from doing so ...but patterns undoubtedly do exist that provide a long term edge.

Re that potential but almost certain ' profit gap' that may exist - an example may be in the analogy you give - ie '...It can be death by a thousand cuts of course...but when the right one delivers, should be compensated...' in that death by a thousand cuts will erode an account, the trader's confidence, and his confidence in the edge (probably exacerbated because he doesn't know whether these 'cuts' falls in the typical - maximum known/possible distribution metrics of the edge) such that when ' the right one ' does happen - he will very likely cut it short if it starts to come back on him- fearing more losses/erosion of the unrealised gain and thereby won't be compensated for the other 'cut's he has suffered over any given sample.

G/L

Sorry wasn't clear.

Assume price is below the line and crosses it up...then buy.
Opposite for a sell.

It can be death by a thousand cuts of course...but when the right one delivers, should be compensated.

 

[tar]

There is no such thing as and edge for a retail trader , it is an illusion , if such edge exists then it will become obsolete in no time due to the competitiveness nature of the markets especially FX and Indices , what an edge even means ?

 

[bbmac]

That's interesting - the common traits of the best traders I know are

1. They have an edge - they know what it is - it is clearly defined
2. They know all about that edge - it's performance metrics - what is probable, and what is possible
3. They constantly monitor the edge
4. They have closed any 'profit gap' associated with their trading of that edge.
5. They know that the psychological war is never won (Re 4 above) - it is battle each trading day - and they are vigilant in this respect.

I think it really is as simple as this....but most won't get anywhere close to understanding it let alone actually achieving 1-4 listed above.

G/L

The best traders I know are constantly on the look out for momentum and if they use chart patterns at all, it is only as indications of where momentum might come in. Their edge is not in the pattern, but in their early appreciation of building momentum and in their appreciation of it falling off. In general, they are not in the business of looking for home runs and they play the bursts of momentum for as long as they last.

I suppose I'd describe them as in the "buy high, sell higher" camp which does not seem to attract newcomers half as much as the "buy low, sell high" camp who appear to throw themselves in front of the momentum freight train all too often.

 

[bbmac]

Sorry, but this is nonsense....whether it be an institutional or retail level trader - edges can be found and lots of them...see my post above numbers 1-5...and there is no reason that the edge will be eroded - particularly if it is built around the constants of trading such for example as supply and demand.

G/L

There is no such thing as and edge for a retail trader , it is an illusion , if such edge exists then it will become obsolete in no time due to the competitiveness nature of the markets especially FX and Indices , what an edge even means ?

 

[tar]

Sorry, but this is nonsense....whether it be an institutional or retail level trader - edges can be found and lots of them...see my post above numbers 1-5...and there is no reason that the edge will be eroded - particularly if it is built around the constants of trading such for example as supply and demand.

G/L

Found ?! Sorry mate but there is no such thing , what's an edge ? an advantage over others ? it is counterproductive , if setup A or B works and provides profits over time then why algos and pros and others didn't take advantage of it ? and if they did take advantage of it then it is obsolete already , there is no such thing as if you followed steps 1,2,3 then you will make money that's so stupid . I will give examples of what could be considered as an edge ? If you have deeper pockets than others that's an edge eg . : penny stocks pump and dump , GS and JPM ... etc , if you are faster than others "high technology" eg . : front running , flash orders , servers nearer to the exchange , another example of an edge : insider information "insider trading" , also market making is an edge , earning the spread instead of paying it . But it is certainly not a setup you see on your charts ,that's an illusion , FX daily volume is in trillions , infinite number of pros and banks and algos are trading it and you think a certain setup or pattern on the chart is an edge ?!

 

[Purple Brain]

Tar - if there is no such thing as an edge, what do you call what you do to trade profitably?

 

[tar]

Tar - if there is no such thing as an edge, what do you call what you do to trade profitably?

Trading

 

[bbmac]

For me an edge is as follows:

A Trading Edge is simply a repeating circumstance or set of circumstances (for eg a chart set-up [s,] ) that suggests there exists a greater probability of price moving one way over the other (for howsoever long,) based on the historical precedent of such to that point in time. Additionally and/or alternatively; if the edge does not suggest a greater probability of price moving one way over the other, then based on historical precedent to that point in time, it suggests that more pip gain is available when it succeeds than when it fails, sufficient to realise a net gain over any given sample.

That's it.

I mentioned in a post above that so long as your edge is based on the constants of trading and in the example of technical trading - demand/supply which results in support/resistance and price action then there is no reason that it should not last and that the edge shouldn't always be there (and that with practice/application you shouldn't find a way of bridging any 'profit gap' that you may encounter with it.) In trading repeating technical set-ups we are simply trading repeating patterns of market behaviour (probably of the very factors you describe) that are represented graphically - and we can take advantage of that. None of us have any powers of prediction so we don't know on any occasion we trade such a set-up (s) that it will produce a gain on that particular occasion but if we can identify the reasons/characteristics present why they tend to produce a gain when they do and a loss when they lose and ally that to sensible money, risk and trade management - optimised to the set-up then we have a edge. It doesn't always follow that '...algo's, pro's...' etc will exploit the same edge. You argument suggests that no edge is available from tech analysis/charts and this is plain wrong because there are consistently profitable traders who derive their gains from this analysis.

All the things you mention in your post may or may not provide an edge - they certainly sound as if they would (based on your evidence - which for me is purely anecdotal,) but they are not available to me.

G/L

Found ?! Sorry mate but there is no such thing , what's an edge ? an advantage over others ? it is counterproductive , if setup A or B works and provides profits over time then why algos and pros and others didn't take advantage of it ? and if they did take advantage of it then it is obsolete already , there is no such thing as if you followed steps 1,2,3 then you will make money that's so stupid . I will give examples of what could be considered as an edge ? If you have deeper pockets than others that's an edge eg . : penny stocks pump and dump , GS and JPM ... etc , if you are faster than others "high technology" eg . : front running , flash orders , servers nearer to the exchange , another example of an edge : insider information "insider trading" , also market making is an edge , earning the spread instead of paying it . But it is certainly not a setup you see on your charts ,that's an illusion , FX daily volume is in trillions , infinite number of pros and banks and algos are trading it and you think a certain setup or pattern on the chart is an edge ?!

 

[the hare]

If you want to get all philosophical you could argue that edges don't exist. You could equally well argue that gravity doesn't exist, sure drop an apple and it was probably fall to the floor, until such time that maybe something changes and it doesn't behave that way.

You have just be a bit pragmatic and hope gravity keeps doing its thing

 

[ZEN archer]

I was reading about one of the patterns used by few traders who used to make a living trading S&P for years. It's a complex pattern consisting of 5 waves and precisely defined entry, stop and target.
I don't think that algos etc. managed to make all the patterns obsolete in the last 10 years. 'Wolfe waves' pattern's success rate may have changed , but there could be some other/new patterns with similar success rate nowadays (somebody else's waves)



Don't be shy
If you know of a good one - post it (non-cryptic style please)

 

[tar]

BBMAC each to their own , but saying a certain setup or pattern provides profits over time is a counterproductive argument for obvious reasons , and it can be used by others to make money the other way by hunting stops "trap" . We have some facts in front of us : as mentioned earlier that's a highly competitive environment ( Money , information , technology ) , and the Bid/Ask liquidity is very limited . I leave the conclusions to the reader .

 

[tar]

If you want to get all philosophical you could argue that edges don't exist. You could equally well argue that gravity doesn't exist, sure drop an apple and it was probably fall to the floor, until such time that maybe something changes and it doesn't behave that way.

You have just be a bit pragmatic and hope gravity keeps doing its thing

And you can trade martingale strategies and hope it keeps doing its thing :cheesy: , BTW it could be years !

 

[bbmac]

so, assuming that it is not in a vacuum, which way would you bet when the apple is dropped - long or short ?

That is an essential point about an edge - which is why it needs constant monitoring and knowledge of it's historical performance metrics

G/L

If you want to get all philosophical you could argue that edges don't exist. You could equally well argue that gravity doesn't exist, sure drop an apple and it was probably fall to the floor, until such time that maybe something changes and it doesn't behave that way.

You have just be a bit pragmatic and hope gravity keeps doing its thing

 

[bbmac]

call it what you will this ' trading ' is your edge !

G/L

Trading

 

[bbmac]

they may be obvious to you, - but they ain't to me lol. As do I.

G/L

BBMAC each to their own , but saying a certain setup or pattern provides profits over time is a counterproductive argument for obvious reasons , and it can be used by others to make money the other way by hunting stops "trap" . We have some facts in front of us : as mentioned earlier that's a highly competitive environment ( Money , information , technology ) , and the Bid/Ask liquidity is very limited . I leave the conclusions to the reader .

 

[ZEN archer]

Somebody chose triangles. It's not a bad pattern at all - for me it has clearly defined entry and exit levels: