Trading Pattern Failures

Discussion in 'Journals' started by fan27, Apr 14, 2004.

  1. fan27

    fan27

    The goal of this journal is to get feedback on rules I am creating to trade pattern failures. I have had mixed results trading failures, mostly because I have been unwilling to create rules. After trading the S&P for the past 13 months (slightly lower than break even the last 6 months) I am willing to make my plan as mechanical as possible with consistency being the overriding objective.

    Here are the patterns I am looking to fade:

    1. Bull\Bear Flag
    2. Triangles
    3. Head & Shoulders
    4. Horizontal Channel.

    I am primarily trading ES (time frames: 5 min,15 min, 30 min, 60 min). I want to expand this method into other markets as I don't get signals very often.

    Here are the rules I have so far.

    1. Mark pattern using trendlines (The pattern has to be very obvious as so everyone else can see it and have time to trade in the expected direction). My goal is that Recognizing the pattern will be the only part of my system that is the slightest bit subjective.

    2. When market breaks initial trendline and then reverses and breaks the opposite trendline, initiate position as soon as second trendline is broken.

    3. Stop is place on the other side of the first trendline.

    4. Once trade moves in your favor the distance of your stop, reduce stop size by half.

    5. Once trade moves in your favor the distance of 1.5 times stop, move stop to breakeven.

    Here is where I am little indecisive on what to do.

    6. Identify previous high\low for profit target. Once profit target is hit, drop down to a lower time frame and use a 1 bar trailing stop (ie. 5 min trade - 1 min trailing stop,15 min trade - 3 min trailing stop)

    I am not to sure what to do if none of my stops get hit and my profit target is not reached either. Should I use a time stop, trailing stop,.....?

    Let me post some potential trades so everyone can see the type of market behavior I am talking about.
     
  2. fan27

    fan27

    here is another failed triangle:
     
  3. fan27

    fan27

    Failed Bear Flag
     
  4. fan27

    fan27

    5 min channel break failure trade:

    Sold ES at 1124.75. Stop is at 27.50. Target is yesterdays low.
     
  5. fan27

    fan27

    Moving stop to 1126.00. (A little less than half of initial risk).
     
  6. fan27

    fan27

    Moving Stop to 25.25.
     
  7. fan27

    fan27

    Stopped out at 25.25.

    Might have a long entry (Failed Triangle Break)
     
  8. fan27

    fan27

    Long ES at 26.75. Stop at 25.00. Target at 32.00.
     
  9. fan27

    fan27

    Exited at 25.25. Positive Slippage.
     
  10. fan27

    fan27

    Here is Trade 1 for today.

    Result = -.50
     
    #10     Apr 15, 2004