I note that the general theme of this thread is not necessarily about the price pattern itself(listed in the schema), but rather becoming an expert at some particular price behavior, trading that ALONE, while avoiding the pitfalls traders typically take by overtrading, overleveraging, and not being able to wait for the ONE niche, studied activity to occur. I believe there is value in that idea. I have spent time trying to do this in the past, but the problem I had doing this with Price Patterns, is that I found them to be so subjective. The brain seems to struggle with pinning price behavior into various boxes to be able to identify THAT setup. And if that is not the issue, I seemed to have observed that when looking at the success/failure rates of patterns, it seems like patterns like this always fail just as often as they do what you think they would. Is overcoming this hurdle simply a matter of not being an expert at identifying that pattern, or understanding when it might do what you think it should? For Example, attached in "Ex1," I note another possible occurrence, where there is a strong down move, with a few swing highs created on the way down. Followed by the 'trigger,' then a strong move up without much evidence of 'stops taken.' Later on, there does appear to be that activity(stops taken) which is a bit later than the examples early on in the thread. While this is a bit different than the examples given early on, I think this one is a bit similar. In attached pic, "Ex2," another example 5 days later on a 15m chart... with the decline, followed by the 'triggered' which I see as quite obvious. The confusion I would have, following the 'stops taken' here, where it essentially happens 3 times(green circle). The question would be how you classify such behavior relative to your examples? Directly to the right of that, that 'stops taken' is a bit more clear(yellow circle) as stops are taken once. The pattern to the right of the yellow circle, each target(red line), is even clearer as it only happens once each time it hits the target line. "Ex3," A case to the upside. The 'stops taken' appears to go a bit above the line here. With another example far to the right of that one, that is a bit more clear cut with a minimal break of the 'stops taken' line. Another Example in "Ex4." Here this is also to the upside, where the normal activity again occurrs up to the 'trigger' point. Then again, 'stops taken' appears to cause confusion, as a case could be made for it happening several times, with wide ranges of price. For something like this, would this just be considered a failure of the pattern, and included in the basket of where this pattern breaks down. Lastly, "Ex5," might depict possible failures. There are two in this picture. After the FIRST 'triggered' line, there is a place where there is a potential 'stops taken.' Although there is never a new high made afterwards. It could be the idea is to wait for the first sign of 'stops taken' before looking to trade THIS pattern? To the right, the 2nd 'triggered' line has a similar behavior. In both these examples, it could be simply that there isn't enough information to begin looking for trades in either of these, but I guess this is up to the observer to study and decide. While the OP has made note of the necessity of 'study' to become an expert at a given behavior, I was finding that even identifying the required number of examples problematic. In the 50+ examples, are failures of such patterns included? Just to say, none of these questions or observations are a knock on the content of the thread itself, as I think the idea(of understanding one thing well while eliminating trader mistakes) has merit and am wondering how to go about removing the subjectivity and variations, or whether to include failures of perceived patterns. With that being said, I imagine the same ideas in this thread could be applied to just about anything? Has anyone thought of some type of behavior that is a bit more objective in it's identification?
Target hit for 3.06 R:R. I have called 3 trades live on this thread. 2 losers 1 winner. Risking 1% per trade would be a net return of 1.00% over the 3 trades.
The issue with price behaviour is that it's hardly ever exact, there will always be over shoots. Keeping that in mind there is value in horizontal extremes. What constitutes a Double Bottom? How far price may be allowed to overshoot for the pattern to remain valid? IMO you absolutely must estimate a target when considering trading a potential bounce off a horizontal extreme. If I am to go long I would always ask myself - where's the most likely resistance price is likely to be bid to ascertain interest? My target would be bit below it (within the noise, rather than at extremes). Having had established reward I can calculate the risk. How far I can allow price to overshoot staying with the trade depends on those factors. Double Bottoms are hardly ever exact, therefore their objectivity resides in ones ability to stay with a trade, yet I would say that an overshoot has to be at least x3 lesser than the closest resistance zone for it to qualify as a valid Double Bottom (same applies to treble and quad tags).
Right, you are saying make your loss 1R but then stop out at .75R? A lot of people would say that's hurtful because you're not giving price enough space to move.
I think what he means is if your edge is gone(reason for taking the trade) then why would you want to stay in the trade
In rebuttal, if when you put the trade on, you know you needed to risk 1R because that is how much room you gave it, then getting out for anything less than 1R means the trade shouldn't have been invalidated yet. Its like if you assume support is at 2200, and you take a long at 2203. This means that price can still come down to support again at 2200 and still not invalidate the trade. If you get out at 2201, just because you're not feeling it anymore, then technically you're not taking your full 1R that you established, and worse, you're getting out when what you based your risk on still didn't happen. Now perhaps you initially get into a trade because you're watching another market, and now something there happened which invalidates the trade completely, then maybe its ok to get out. Perhaps the market you're trading hasn't stopped you out yet, but the reason for your trade isn't looking good, so this I could understand, but in my experience, once you start to mess around with stops while in a trade, you're probably not saving much. Perhaps on this one trade you save a point because you cut it sooner, but there will be just as many times where the trade does turn around, and goes to profit, but without you since you bailed too soon. If your reason for using 1R is tested to show an edge, then moving it will mess with your stats.
If someone trades higher lows and lower highs and there stop is not hit and it forms a higher low and you are short there is no need to stick around and wait for your stop to be taken out
So you're getting out of a short just because price made a temporary higher low even before it breaches the previous high? I image that quite often, you get out of the trade and then it still ends up going lower. The point though is that if initially your stop on the short was above the previous swing high, then just because price makes a higher low, a so called triangle pattern that is closing in, there is no reason to assume it can't go lower. It can still break to the downside, or perhaps to the upside, but changing your stop without the previous resistance level being breached will I don't think save you that much money in the long run. It might save you sometimes, but other times, the trade continues to work without you.
Actually yes if this is what my plan calls for and if you have statistics to back it up absolutely I would exit with a small gain and re enter if my plan says too, many ways to make money I just know that if I'm not consistent with my method I will never have the trust in myself to follow my plan and then all hell breaks loose