Discussion in 'Index Futures' started by tradersaavy, May 11, 2003.
How many 5m reversal or flag patterns occur daily in the NQ/ES ?
I think the "how many" depends a bit on which definitions you use for a reversal pattern:
Tweezer tops or King and Queen or Adam and Eve patterns...two similar range bars going in different directions right next to each other with slightly different candle features maybe
Hammers or dojis at key S/R areas.
Wide Range bars with or without heavier volume
Engulfing bars especially after a narrow range bar...
1-2-3 lower low or higher low or lower high or higher high combinations - very subjective pattern but one with definitive rules to enter and exit - also called a 2B or double top...
Other 3 bar reversal patterns commonly described by the book writing gurus abound...
etc etc. Even flags and pennants can be somewhat debatable.
Personally I think there are 4 to 6 (or more) such patterns on average per day on the 5min NQ or ES chart...that's just my experience that an average day has 3 or 4 major swings and 2 or 3 minor swings, if you're a daytrader...on low volatility or strong trend days, many of those swings might end up being marginal, simple shallow retracements or small breaks into the 20ema or 34ema or the OR or the pivot or something. On days without as much clear directional bias you might get 4 or 5 such moves good for several pts per move etc.
Bottom line it all depends on what patterns you believe in, how you interpret them, etc. I can spot at least 6 that I recognize and watch for on friday though a few didnt carry very far with the tight afternoon range...i see at least 6 on thursday..etc etc..its which patterns you want to find..whether you can find them in realtime or only later...and how you have your targets and stop methodology, your exit and risk set..that will ultimately determine if you can make any use of "Reversal patterns" on the intraday indices charts.
Just my 2 cents
These are some that I see on Friday...only 3 of them were formations I actually used to assist in confirming a trade. This is mostly to just show what I was meaning by the many type of reversal patterns. I'm not advocating Any of them, or any particular methodology.
(First time posting a chart, not my forte, so I apologize if its hard to read or unclear or posts poorly or makes utterly no sense )
You are not going to make a living daytrading ES with these patterns, you are going to go broke. BTW, IMHO eminis are not suitable to sub-25K accounts still almost everybody in that situation has tried them. You need to trade several contracts to make it that means BIG account and trading mastery otherwise you'll go broke... fast.
I agree for the most part Kicking...my posted chart was merely to illustrate how many such supposed Reversal Patterns one can find in any 5min chart on any given day. The fact that there are so many almost speaks for itself in terms of how effective they are...which is to say, not that effective unless you are trading huge size for small gains and/or far more nimble than most traders I know. As I said in my 1st post, patterns are there where you want them.
Thanks for the replies so far to everyone. Good point about what type of reversals. I personally look for major type reversal patterns like 2b/2t, head shoulder, etc. But, again great point about the 1 - 3 bar candle type reversals. Hmmm, maybe I'll study those further.
Oh, and great chart postings. Pictures do tell a thousand words !
As noted by the chart in an earlier post, reversals of the type shown are very easy to identify after the fact. However, flags are one of the most reliable chart patterns and one could definitely make a living trading them. The only setup I trade consists of a "Thrust" on a 5 minute SPY chart, then a flag or variation there of on the 1 minute chart. Its only been about 7 weeks of daytrading so far, so I guess I'll have to report back in several months to confirm my Thesis (wether or not I can exploit this edge and make money consistently).
Friday was an "easy" day for daytraders . Keep in mind that very short term setups work for a while then stop working then work again, from time to time they become real traps. When can you say they work consistently again? well into a new move probably and it's about to change again. I think over the past 2-3 weeks we have had many nice moves on the upside intraday and the market has gotten better, and you see a lot of flags and pennants etc. but not long ago these used to just chop you to bits.
I don't think that trading Emini's is suitable for anyone who can not trade stocks, but most of the people taking up the Mini's right now are those who have failed as stock traders, or at least brought their stock accounts under $25,000.
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