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Pattern Trading

  • #1
  • First Post: Feb 15, 2008 12:49pm Feb 15, 2008 12:49pm
Hello to everyone at FF,

I have been a stalker of the forums for quite some time and lots of the people here have put up many systems that I have tried and tested. I have found one type of trading that suits my style and has managed to actually make me money.

Pattern trading or Gartley, Butterflys, Crabs and Bats, yes I spend my whole day looking for these little patterns on all the currency charts on 12 pairs at the same time. Its easy, and not only that but I found a free software written by a Russian gentleman call Nen. Nen is a very smart guy and he written a program to use Metatrader to automatically find these patterns on any time frame.

Simple, money making you might think...well not quite. Using the software with no application meant that I was making money and losing money. So I decided to go to the man who discovered patterns and ask for his help. Larry Pesavento discovered the ratios that make these patterns work, and to be totally honsest with everyone here, they are about 70% correct. Larry is a real trader that makes his money trading for a living, he is a genuine guy and his book trade what you see is the business.

Patterns are predictive, in as far as they often tell you where the market will turn, and yes I have even traded the signal on news events, and guess what!!! They often get the direction of the move correct.

I will post the indicators for everyone to download the latest ones, and I will happily discuss entries and exit strategies for any one interested.
Attached File(s)
File Type: zip ZUP_v60.zip   38 KB | 4,664 downloads
File Type: zip ZUP_RSI_v48.zip   31 KB | 3,743 downloads
  • #2
  • Feb 15, 2008 12:57pm Feb 15, 2008 12:57pm
Thank you, I am very interested and waiting for you to explain more.
  • #3
  • Feb 15, 2008 1:06pm Feb 15, 2008 1:06pm
Hi Smalldog,

Could you pls post your template, to ensure that our charts look the same. I'm sure this will prompt the right questions!

Thanks for sharing

Pardy
  • #4
  • Feb 15, 2008 1:11pm Feb 15, 2008 1:11pm
Ok here is a trade I have just taken, as you can see my risk is just 7 points and my reward is 24 points so I only have to be right one in three times to break even, on the toss of a coin I should do better than that!

Depending when you trade, and what do in the trade will often determine your sucess, always hold to your profit objective, Once the trade moves your way and hits the 50% retrace of the last leg of your pattern move your stop to break even for a risk free trade and a stress free life.

Feel free to ask any questions.

Smalldog
Attached Image (click to enlarge)
Click to Enlarge Name: 1st posted trade.GIF Size: 41 KB
  • #5
  • Feb 15, 2008 1:20pm Feb 15, 2008 1:20pm
If anyone can tell me how to post a clearer chart I would be delighted. I also have a stocs running below the graph. I do not ever rely on stocastic as they are lagging indicators and are very good at predicting the past.

As a trader you want to know what will happen in the future, no one here drives with their rear view mirrors, so why trade in the past?

Ok my entries were shorted @1.0933 profit target 1.0903, as soon as this market hits the .38 of the CD leg my stops goes to break even plus 2 pips, because if I am wrong then I cover my costs and wait for the next set up.

Once you trade you can not be sure of the outcome, you are dealing in probabilities, all you can do is control risk, once my risk is covered, I forget about the trade.

In order to make money trading that is what you must do.


Smalldog
  • #6
  • Feb 15, 2008 1:24pm Feb 15, 2008 1:24pm
Right click in the chart area and select Save As Picture. Then select Acitve chart. It will be save as a gif or JPG and then you could just upload it the same way you have done with your screenshot.
  • #7
  • Feb 15, 2008 1:30pm Feb 15, 2008 1:30pm
i put them on my chart and it draws quite interesting one.
according to your chart, you're looking at the stochastic also.

can you explain in detail how we can intepret this chart?

thanks.
  • #8
  • Feb 15, 2008 1:34pm Feb 15, 2008 1:34pm
Ok that was good of you!

Now at the moment the trade is plus 5pts, I have often found that is a pattern fails then the .38% is the first sign, it indicates the market is lacking strengh, what I like to see is a nice V formation after the pattern, and a quick move away from the entry.

This is a weak market and it is finding trouble breaking the .38 level, I am not worried as my stop is 11 points away. The market wants to turn it just does not know it yet.

We shall see!

Smalldog
  • #9
  • Feb 15, 2008 1:38pm Feb 15, 2008 1:38pm
I don't see any pattern for 1st chart: EurUsd. As for 2nd chart: GbpJpy, at what point do you consider a selling point or buying area?
Attached Image(s) (click to enlarge)
Click to Enlarge Name: patterneu.JPG Size: 62 KB
Click to Enlarge Name: patternGJ.JPG Size: 70 KB
  • #10
  • Feb 15, 2008 1:40pm Feb 15, 2008 1:40pm
Forget trading this over minute charts, you always have to use a stop of at least 10-15 points to begin the trade as you never know where the market will stop, once you are in you can pull your stop good and close as the market moves in your direction.

The best time frame I have found is 30-60 min charts, I have used a 5 minute chart as an illustration, you can trade with them but the rick to reward is usually not in your favour.

4 hour charts are even better and a lot less stressful too!


Smalldog
  • #11
  • Feb 15, 2008 1:46pm Feb 15, 2008 1:46pm
I am set to the 5 min charts on this trade, word of caution on trading patterns. Always check on the larger time frame for patterns the bigger time frame usually always wins so, if you have a down pattern on the 60min, then it is better to trade down on the next time frame not against the larger pattern, that way you will always be trading with the bigger trend, not fighting it


Smalldog
  • #12
  • Feb 15, 2008 1:57pm Feb 15, 2008 1:57pm
This is great Smalldog2. Very useful indeed. Can you warn or post an image that you think is unfolding that would setup for a good long/short position. I just want to get a better understanding of when to get in and out by looking at the patterns.
  • #13
  • Feb 15, 2008 2:06pm Feb 15, 2008 2:06pm
it's got bunch of lines and i see blue butterfly wings.
zigzag rsi with a lot of numbers.

can you explain about the chart?

well, thank you for your advice from your previous posts.
yes, we shouldn't fight the trend but go with the flow.
i get it. thanks.

let's just talk about technicals for this chart.
how don you intepret this? how do you find the entry point on this?

thanks,
Attached Image (click to enlarge)
Click to Enlarge Name: usdchf30.gif Size: 67 KB
  • #14
  • Feb 15, 2008 2:07pm Feb 15, 2008 2:07pm
Once you have a pattern you can choose to enter a trade, in the opposite direction to the markets current direction, when the numbers that connect the tops of the waves are yellow it means they are fib ratios, and they are more powerful at predicting the move, if all the ratios in the pattern are fib ratios (yellow) you have a great chance of the turn happening.

The stocs are underneath as a guide, very often the market will turn when you are either overbought or oversold on the stocs. So if my stocs are indicating a potential turn and I get a pattern that indicates a potential turn then is has a greater chance of happening.

I am putting the probability in my favour, the pattern must come first, the stocs are just another bit of icing on the cake!

Smalldog
  • #15
  • Feb 15, 2008 2:40pm Feb 15, 2008 2:40pm
Ok here are the rules I use and I would suggest you use them too!

Look to enter the pattern in the at the end of the last blue triangle, you have a "W" shape, and the rule is to enter the market when the last leg equals in length the 2nd leg, so according to my chart when AB=CD, use the fib tool to measure it.

If you want to get really good at it I suggest that you get the book "Trade What You See", there is a lot more that is covered in this book and Larry Pesavento deserves the credit for writting the book.

I lost money trading originally, most systems are complete rubbish, this will work just fine and with a little practice, correct money management, you can make money trading, I do now that I know how to do it.

This program is a rough pattern recognition program, you need to apply it correctly, do not trade late at night, or towards the end of the day the random noise will fool it, do not trade Monday morning GMT, as the patterns are often overshot, and you will get flatterned.

Please always use stops, always!
  • #16
  • Feb 15, 2008 3:22pm Feb 15, 2008 3:22pm
Quoting smalldog2
Ok here are the rules I use and I would suggest you use them too!

Look to enter the pattern in the at the end of the last blue triangle, you have a "W" shape, and the rule is to enter the market when the last leg equals in length the 2nd leg, so according to my chart when AB=CD, use the fib tool to measure it.

If you want to get really good at it I suggest that you get the book "Trade What You See", there is a lot more that is covered in this book and Larry Pesavento deserves the credit for writting the book.

I lost money trading originally, most systems are complete rubbish, this will work just fine and with a little practice, correct money management, you can make money trading, I do now that I know how to do it.

This program is a rough pattern recognition program, you need to apply it correctly, do not trade late at night, or towards the end of the day the random noise will fool it, do not trade Monday morning GMT, as the patterns are often overshot, and you will get flatterned.

Please always use stops, always!

This is very interesting SmallDog 2 . What are your favorite pairs that you use this trading pattern strategy with. Thanks, Paris
  • #17
  • Feb 15, 2008 3:26pm Feb 15, 2008 3:26pm
I got a pattern in the opposite direction and I closed out my first contract and re entered in the opposite direction.

I always look at the bar formation long strong bars indicate strength, in this case I like to trail my stop on the last bar low or high, this was a great trade and netted another 20 points to add to the first 10 points.

If trading the patterns always make sure you respect the patterns when they appear. I would rather close a trade and re-enter taking a small profit then see my account go into the red.

My stops are small 10-15 points and I go for 20-30 pts targets, but if the market tells me that it will not make the move I exit. Never let a winning trade turn into a losing trade, its bad for your mindset.

Smalldog
Attached Image (click to enlarge)
Click to Enlarge Name: end of trade 1.gif Size: 32 KB
  • #18
  • Feb 15, 2008 3:42pm Feb 15, 2008 3:42pm
Hello Paris,

I hate not trading so rather than force trades, ie try to make them happen, I open as many pairs as possible as the more you trade the more money you make and the more choice of good trades you have the better quality trades you have.

I apply this across all the main pairs, if someone knows how to connect Metatrader to the IB interface, please PM me as that is the only thing stopping me trading 30 or 40 instruments at any one time is tha fact that I use Metatrader as my pattern finder.

The more pairs Paris the better.

Smalldog

P.S how my last trade finished.
Attached Image
  • #19
  • Feb 15, 2008 4:56pm Feb 15, 2008 4:56pm
Quoting smalldog2
Hello Paris,

I hate not trading so rather than force trades, ie try to make them happen, I open as many pairs as possible as the more you trade the more money you make and the more choice of good trades you have the better quality trades you have.

I apply this across all the main pairs, if someone knows how to connect Metatrader to the IB interface, please PM me as that is the only thing stopping me trading 30 or 40 instruments at any one time is tha fact that I use Metatrader as my pattern finder.

The more pairs Paris the better.

Smalldog

P.S how my last trade finished.

Looks very good. I'm tired of using indicators as they only seem to win half the time on average. I'll get to studying this chart pattern method. I suppose I can get Larry's book " Trade what You See" from Amazon? I really like this and I'll study, practice and apply it to the daily chart so I can trade many pairs and only have to check the charts a few time per day. Thank you, Paris
  • #20
  • Feb 15, 2008 5:17pm Feb 15, 2008 5:17pm
"This program is a rough pattern recognition program, you need to apply it correctly, do not trade late at night, or towards the end of the day the random noise will fool it, do not trade Monday morning GMT, as the patterns are often overshot, and you will get flatterned."

Small dog, Excellent post...gets me thinking...I am in USA, PST....WHEN do you find are the BEST times to trade??? Late at night for me is 11 pm PST...Towards the End of the Day...is that in reference to London, New York, Asian end of days????
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