In love with patterns

I see. Thank you guys!

You do great job here

quick update... market is pouring a lot more patterns than I have the chance to document / evaluate / think about ... just posting these false breakouts because I think they are related to Pinocchio bars (mentioned in many places, I just pick this one with collected charts)

Ok what I think is the same on the attached charts - price clearly closes above the last X. candles (let's call it a breakout) then in a short time it falls back to the range - former resistance does not become support, there is no demand - and guess what, in a short time, it's time for a short - (ha-ha, sorry for the terrible pun)

The EURGBP chart is one exception - price closes high on M5, falls back miserably, we might prepare for a short... but after a while demand pulls prices higher again. So as always, no method or sign is perfect or infallible, the market can always turn around, let's be careful.

Hi, I felt into such traps so many times, that I completely stopped trading breakouts in situations like these. The problem is that you are effectively selling lows or buying highs with the hope they are not real highs or lows, which takes some edge out of the trade. The higher the time frame, the worse it gets, unless it's some real and finished breakout pattern like falling/rising three methods, e.g. unless you go in on candle close, and it is not already to far behind S/R.

I am trading these patters using one of following methods:
1) Scalp the bounce of S/R (and skin the cat as many times as possible).
2) Open small position after bounce from S/R and increase it if it plays out well, e.g. go speculatively counter trend and trail the stop.
3) If it breaks out and closes on the other side, let it go and wait for pullback, then go in the direction of breakout - but the move has to be larger then just one or two candles.

Also, to go with the trend, I would go in rather on pullback then breakout, for above mentioned reasons. If I miss it, then be it. But I guess many people have more luck with breakouts then me ...

BTW, great thread, I love patterns, I will try to contribute if I spot one, but trading mostly on daily graphs requires some patience

Spring - the price breaks the resistance and is bouncing up from it several times. It's pretty obvious how to trade it, but beware of fakeouts. Once the price breaks the spring on either side, usually support becomes resistance (or r becomes s) pattern follows.

Because I have been speaking harshly about breakouts, I believe the chart I posted deserves one more comment There is one obvious false breakout, and here is why I did not trade it. In my view patterns take precedence before S/R levels, because S/Rs are just psychological lines in sand, that can be swept by next tide, while patters are measure of psychology of traders who are making the market. The down move took out the support, but it ended with hammer, with following candles failing to break new low, so it was pretty obvious what was going on despite the fact that some of it was happening below the support, end even bellow psychological support at 1.4200.

Sorry about being late. Yes the anticipated pattern worked out just fine.

I don't know if this pattern has any official name, so I will call it knocking. It repeats a lot. Price tests S/R two times and if it closes on the other side for the third time, it's a trend continuation pattern.

it looks like reverse head and shoulder.

look at each red line separately. what Pipsy means is, if price knocks the level 2 times and then closes on the other side (does not bounce back the 3rd time), then it could be a trend continuation sign.

I agree this is a useful observation. Thanks for the post, Pipsy, that was my original intention with this thread, to share those observations.

This pattern repeats itself all the time, by design, because it's the big guys who are moving the market, and not us puny retail traders playing at broker's playgrounds. It's always better to go with them then against, so how to tell they are joining the game?

One option is volume spread analysis, but quite often it's pretty obvious from the chart pattern what is going on. After strong move in one direction big guys enter from the other side with all resolve and resources they have, stop the movement and push it back. This quite often produces candle with long wick, or some other reversal pattern if it happens around the candle close. Lets say they start buying at discount prices as in second rectangle. This initially scares the sellers, who unknowingly try to push the price down one or more times, thus giving buyers better prices. At the end they get too scared and give up, liquidate their positions and together with prospective buyers push the price up. If the congestion area stays above initial low during whole game, it is a good sign of seller's weakness, but sometimes they manage to create a new low (false break), only to feed the sharks even more.

Variations on the same theme on 15min chart.

1) Entry from bottom, visible reversal pattern (piercing line) followed by a doji showing a war between buyers and sellers, with sellers quickly giving up.

2) Entry from top, with buyers trying to defend their positions and creating double top.

3) Strong move up after breakout stopped by sellers, with buyers trying to push the price up two times and giving up.

4) Here defensive buyers pushed the price above initial high, but failed to keep it there.

This happens all the time, on all time frames, because this is how the market works. If you zoom in on 5min chart, you can see the same around the moves to small to provide clear picture on 15min.