Trading A Pattern Setup

Discussion in 'Psychology' started by larrybf, Apr 14, 2003.

  1. I daytrade the emini futures and take trades when a particular pattern setup appears on a 3 min or 5 min chart chart.the pattern has proved to be fairly consistent.I now find myself "blocking out" all other patterns i have learned. in additions i discarded technical indicators long ago. FOR those of you who trade price action or pattern setups, do you find this focused tunnel vision approach a good way to trade a pattern , which although far from perfect, consistencly gets "base hitS". sorry for the analogy but i am big yankee fan and it is now the season.
  2. What pattern do u trade?
  3. Yes, give us the pattern so we can all pile in on it... :D
  4. Berliner


    good morning Larry,
    we are not really that big baseball fans here in Germany, but I trade some currency futures at IMM/CME with just a few pattern setups, and being a soccer fan, it seems to me that there are more goals into it than before, when I was overtrading with so many indicators and oscillators etc. which I all dumped one after another. No, I think it's good to specialise in one thing (pattern). If it's profitable, of course.

    Berliner (from Berlin:) )
  5. larrybf,

    The same thing happens to me often...very often.

    This is one of those psychological trading problems I've been working hard on since late last year.

    When I start seeing I'm having too many trading days without trade signals...then I know something has changed.

    It's not an issue of hesitating to pull the trigger...its an issue of missing trade signals because of concentrating on something else that has been working well.

    I have a patterns (trade setups) that repeat often and are very reliable while trading the Eminis.

    Sometimes I get into a deep groove with one or two of them and easily forget I have other trade setups that can produce profits...

    this deep groove can last many trading days or longer...

    Yet, during the trading day...I get a lot of missed trade signals.

    (mainly because I'm a discretionary system trader and not a mechanical system trader).

    The problem is this...

    similar to yours...once you get focused tunnel vision (as you put it) and it persists into the next trading day...then the next...then the next...

    and if your bread-n-butter trade signals don't appear one particular trading day along with you missing your other trade signals that do appear...

    Resulting in a trading day of no trades because you thought there were no trade signals. hindsight review of your charts after the market discover there were trade signals via trade setups you haven't been putting too much emphasis on because you were focusing too much on the other stuff that were either more repetitive or easier to capture.

    Repetitiveness don't last forever and it's critical for a trader to realize this so they can cycle through their trade setups as soon as possible when market conditions change...adapting to the markets.

    What I mean via the above statement is this.

    Lets say you have 10 good trade setups...very reliable.

    Then from Jan - Mar...3 of the 10 have been consistently appearing...making you good profits.

    The markets will change eventually and those 3 trade setups may no longer be common for you anymore eventhough they are still profitable...

    most likely another group of your trade setups (the ones on the top shelf collecting dust) have started becoming more repetitive for the next 3 months.

    (3 months is for example only and can be any kind of duration)

    Therefore...traders need to adapt to the markets via focusing on what's becoming more repetitive when just months ago it wasn't.

    Here's my current attempt to fix that far its helping a little....

    1. Review ALL your trade setups nightly during the business week or prior to the market opening...

    this takes me about 20mins.

    2. Do a weekly wrap-up review...printing out annotated charts of trade setups you should have not missed.

    Last year I was only nailing about 30% of my trade signals and I was very happy with that.

    Since November of last year...I've gotten that percentage up to 50%...

    (out of every 6 trade signals...I'm capturing 3 of them)

    my current goal.

    By end of this year...I want that to be between 60% - 75% capture rate.

    Once again...consistently reviewing your trade profession is a key to fix this psychological trap for traders that get stuck on focusing on one thing too long...increasing the odds of missed trading opportunities via other trade setups they kind'uv put on the top shelf collecting dust.

    Note: It's rare for a trader to have one trade setup that works in every cycle the market traverses througout the year.

    Having such...would be called the Holy Grail and I've never met a trader with such.

    Main reason why I don't think there's such a thing as the holy grail.

    P.S. No need to reveal your pattern(s) unless unless you feel will help with resolving your problem.

  6. Berliner


    I didn't read that much pessimism into Larrys post. Well, maybe I am wrong.

    The point I like to do is: pattern setups have proved for me for at least 5 years reliable and unchanged perception filters into the markets, because they express the only philosophy of trading I fully understand. This philosophy is "supply and demand". I found it reliable in the energy markets, currencies, minis, metals und livestock, all of them I have tried and traded and still trade.

    Constantly monitoring volume/w pattern is a discretionary task, sure markets change, but not the philosophy and the ability of the trader to catch the flow. Beside, if there is no signal at all, do yourself a favour and go out for a walk or read a book. IMHO.

  7. If the pattern setup you are using work out fine then stay trading it.

    For discretionary trading, the key to success has nothing to do with how many patterns you use or how many setups you know. It is all about the money - using many patterns at the same time will usually result in confusion of mixing your performance with a particular pattern. :)

    Usually it goes this way -

    1. You trade 1 pattern (70% winner with low PF), works fine
    2. Then you add 1 more (60% winner higher PF), works better
    3. Then you add 2 more (80% winner very very low PF), think that you can handle it.

    As a discretionary trader, you do not know that each pattern you have discovered has very distinct risk/ratio behaviour. Thus the last 2 extra patterns will affect your judgement on the first 2 which are the ones you likely have the matching character because they are the ones you first identify.

    As long as you are CLEARLY aware of your patterns and their individual behaviour then trading multiple setups should be ok.

    Otherwise there is absolutely nothing wrong trading a single setup if it is making money for you.
  8. Berliner,

    I too didn't read much pessimism in his post.

    It's a trade problem that simply...sneaks up on a trader.

    Also...for me...the issue isn't if there is no signal.

    The issue is if there is a trade signal...that was missed because of focusing on something else.

    By the way, in previous posts in the past...I do emphasize...

    * Taking a walk, reading a good book, taking a nap, catching a quick movie, doing personal errands when the market has nothing for you instead of sitting there staring at the monitor.

    P.S. I get in about 5 hours of walking every week :cool:

    Hopefully this thread gets moved to the psychology thread...

    its a good one for it.

  9. Berliner


    I completely agree with all of you. Sorry if I opened up a pseudo problem, didn't intend to.

    Lawrence, I am a Neoticker addict.

  10. prox


    I think you have to factor in market conditions, and critical support, resistance, trendlines on multiple timeframes.

    Trading off a pattern is fine, but a dominant resistance level on the daily chart will probably get in the way.

    Trading is all about market awareness and doing your homework to know when the odds are your favor, rather than some magical setup.
    #10     Apr 14, 2003