How does one search for triangle patterns and other chart patterns? Is there a way to scan using a scanner like the one Think or Swim has or do you have to search by hand? Thanks
Triangles occur over a myriad of timeframes; decades, years, months, weeks, days, hours, minutes. You haven't specified. A narrowing average true range (ATR) probably can be graphically reflected as a triangle. A triangle must resolve. However, resolution can be a headfake. Breaks BEFORE the apex are more reliable.
stockfetcher has triangle scans. They need refinement, but they flex to different timeframes. They can also be refined to show or exclude those they have already broken out.
I agree with 'Efficiency' about contracting or expanding ATR to signify triangles... Also the breakout near APEX provides excellent trading opportunities. Intra-day, markets do provide plenty of opportunities to trade using Triangle patterns... Triangles are classified as Symmetric, Ascending and Descending triangles. Most Ascending Triangles form in Bullish markets, Descending in bearish markets and Symmetric triangles signfiy when 'supply' and 'demand' are equal, hence form in indecision markets... Clearly the breakouts/breakdowns are best ways to trade them. I also use intra-Triangles to trade the support and resistance levels bounded by the Trendlines... Most Triangles are easily detected by using Trendlines. In my view, I think it is best to use basic Auto-Trendlines or Auto-ZigZag tools to deteremine Triangles. One another way to find Harmonic Triangles (ABC) is to determine a PivotStrength based search on price-charts to detect ABC Triangles... Which provides a harmonic frame-work for ABC Triangles and Trading areas/targets.. The key points in ABC wave are detecting or correctly finding 'A', 'B', 'C' pivot points in a chart. These key Pivots are searched for various Pivot Strength levels and used for its correction waves. Once 'A', 'B', 'C' points are determined, a fiblevels algorithm is applied to determine the confluence level of 'D'. This area is called 'Potential Reversal Zones' (PRZ). Here is an article I wrote some time ago about Auto ABC Triangles... http://www.surinotes.com/index.cfm?CSEL=6000&CAT=1&IDX=2 Some of my Intra-day Trade-Examples using Triangles, Trendlines can be viewed at... http://www.surinotes.com/index.cfm?CSEL=1001 Regards, Suri
Thanks guys. By the way, what the heck is ATR and APEX? My time frame is a few days or so. I'm looking for triangles that have formed for maybe a few weeks and things have really tightened up so I can have a chance to profit on a breakout in either direction if and when it does finally breakout. I just need to know how to scan or otherwise weed out the thousands of stocks that would not be candidates. Obviously I'm not going to be looking through thousands of stocks by hand just randomly typing in letter combinations in the quote box. I need a way to at least narrow things down a bit. Thanks again for the replies.
True Range is the greater distance of 1. Today's high to low 2. Today's high to yesterday's close, or 3. Yesterday's close to today's low. Thus incorporating a gap (if any). Gaps being synthetic price points established by the specialist/market maker. Average true range would be just that, a smoothing to provide typical volatility over a time frame. 20 days for example. Apex is merely were a declining resistance trend line graphically intersects a rising support trendline. One of the respondents mis-interpreted what I wrote, To clarify, a breakout (or breakdown) that occurs about 2/3 of the distance to the apex of a drawn triangle is going to be more reliable (valid and potent) than price that carries all the way to the apex. You might be better served to follow a stable of stocks day in day out, at least until you can demonstrate to yourself you can make money consistently. Familiarlity breeds confidence, and LESS surprises. "They're" here to take your money, and contrary to many of the clowns here, this is a serious business with a machine that perpetually needs to be fed. Breakouts distribute accumulated paper.
Thanks for clarifying. What is the reasoning behind the breakout/breakdown being more reliable 2/3 of the way to the apex as opposed to at the apex. Yes this is a serious business and should be treated as such. It's not surprising that there is such a high failure rate but a lot of businesses are like that. I've been watching a group of stocks for about 5 months now and yes, you do begin to gain confidence in the way things behave after awhile. Paper trading with Think or Swim has been doing good so far. If I'm not mistaken, risk management and overall money management is paramount to success. Even if you're pretty good at analysis and have a proclivity for selecting trades that go your way, you'll get crushed if you don't know how to manage risk, correct?
Pennants, triangles and flags are my moneymakers. I do not use pattern recognition software. The human eye is much better once you know what to look for. Using a 2 year daily bar chart and focusing down to a 3 month candlestick chart. The extended bar chart allows a total view. I dont ever go long when there is price action above the pattern and vice versa for shorts. I want the issue to move unfettered by any inventory that a bag holder may be hanging on too. The candle view allows a more intricate look at the most recent action. For example, are there long shadows that have recently tested support or resistance within the pattern? My scan is as follows. - 4800 domestic equities..my entire universe - ADX above 20 (trending issue) Since these patterns are consolidation/continuation this indicator works well here as you want to find the issues that are taking a break in a nice trend. - price 20-60..just numbers I like to trade. I usually avoid high priced names because I simply dont want to put large amounts of capital to work for a few hundred shares. - 21 day avg volume no more than 1mm..lower volume often mean small float which equals dynamic moves...the lower the volume the better IMO. End of day this usually produces about 60 candidates. I`ll scan each of them for the patterns. Then I`ll draw my trendline connecting the highs and lows that create it. Then the only job to do is wait for an alert when a line is breached. Or if you are more aggressive place stops a tick outside the pattern. I use a fixed 10% of portfolio per trade size and stop out if I lose 3% of that. I`ll stay in as long as the trend holds..i.e HH`s or LL`s. Once a HH or LL is truncated i`m gone.
great post. I am working on a simliar strategy but have different requirements for the universe. I look for low float along with high EPS and good RS(WJO style). I then look for stocks that already started a leg up and look for the patterns discussed here and then look for continuation for another Intermediate term leg up.