Why a chart pattern fails?

how about encouraging and helping someone to find the right answers?

if all knowledgeable and brainy persons were super hit traders, then MENSA would be full of millionaires....

Here's an example from today. The two charts are both the same time period. The top is the Canadian $ (note this is the future and is quoted CAD/USD not USD/CAD as the cash market is) and the bottom GBP. On both charts, down means USD is strengthening.

Both currencies rally then drop to test support. CAD bounces GBP breaks down.

The simple answer is that the chart pattern didn't generate enough order flow.

Chart patterns don't exist. Peoples flawed expections exist. If person A with broker B looking at exactly the same chart as person m with broker n sees real price differentiations and therefore different patterns what does this then tell you about magical chart patterns? I suppose these price anomalies between brokers fades away the higher the timeframe though.

Why do chart patterns fail? Why do some people go to work during the day yet others at night, or not at all? Why is there more than one religion, or any at all? Why do some people hate tomatos but like hamburgers with tomatos on them? Why do some days I eat bread for breakfast yet other days I eat leftovers?

What an nub-cake !

question the obvious, u will discover many things. Yes people may ridicule , but one should go on......

What is a chart pattern? Simple, a number of candles which appear in a certain order.
But for this you need a certain TF. Go to another TF and you will not see the same pattern. As there's a very big number of TF's, from 1 tick to a month, at every moment one can find any imaginable pattern if he looks at every possible TF.

Last week I discussed with a trader about his system which "works" (meanwhile he "forgot" to post it ) and he's using 4 TF's with 3 EMA's each. Therefore he has 12 EMA's which at any point will give contradictory signals. I have been banned to post on this topic.

I'm only saying that a pattern is a way to find order in chaos by trying to characterize the market using a few carefully choosen numbers. This approach can't offer an edge by itself so it is my humble opinion that a chart pattern is just another way of flipping coins for finding entries.

You show a new trader this sort of image and they're hooked for life. It's text-book, isn't it?

Once seen, never forgotten; problem was I didn't see it coming! Bye bye first account

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Personally I like this technical picture

That's a very good point. There are some things that show up on multiple time frames though.

Two more pics.

Just beautifull aediaz I might drop one from my diamond collection later on if im feeling like. Next time we get such huge formation we shall buy ourselfs brand new MB (for starters lol)!

Careful, or people might start to think that patterns can be traded with profit

Just a small one from my library:

hi novicetrader.
i have to warn you this is my 1st post on ff and my spelling is not the best
i only went to school to eat my lunch and look out the window.

i feel chart patterns does not fail. it is the job of each chartist to recognise the chart pattern we a corrently in and when that pattern could possibly end. trading is a game of probabilities, recognising chat pattern should increase your percentage of profitable trades.
i find the first sign of a end of the present pattern is a divergence in my momentun indicators (macd ect). yes momentun indictors are lagging indictors but i have found over the years that this is not always the case. divergences in momentun indictors are a indication that the momentum is changing, there for, the present pattern is about to end.
you may have to drop your time frame charts to confirm the divergence.
i hope this helps.
any comments are welcome.

have a good one.

582

..........^^^^^....^^^^^^^^^.......

S/R lines will show on all the TF's, as they depend only on the price. I don't consider them chart patterns but more like price action. And they are probably the only technical indicators which can be traded profitably.

To borrow a phrase from someone else... indicators are very good at predicting the past. Like indicators, chart patterns are lagging sources of information (Divergences also have the same weaknesses). Patterns only confirm themselves after the market has moved in such a way as to reveal the pattern. If the market doesn't move in such a way as to produce a confirmation, another pattern begins to emerge--perhaps an entirely different one. And then that pattern would only become certain after the market moved to confirm it. Again this typically happens too late for a trader to utilize it.

The only elements of chart history that carry any substantial weight into the future are support and resistance. And even then support and resistance levels can be muddled and uncertain. At best the only predictive powers a support or resistance level has is that the market is likely to linger at an historically established level for a while before moving somewhere else. This says nothing about where the market will go afterward. The price may bounce off of a level and go back or it may push on through it.

Yes, this is a game of probabilities, and this includes probabilities of chart patterns emerging or not emerging. The probabilities become more and more difficult to manage when you try to identify chart patterns on multiple time frames. Rarely will you find agreement on more than one time frame, and then the patterns also have to be confirmed by price action as well--something that may not happen with one or more of the patterns. When a pattern falls apart, you're left with nothing to hold on to.

Again the only thing that rises above the noise is support and resistance. They exist regardless of the timeframe in which you observe them. But even then there are no guarantees that support and resistance can provide useful information.

Support and resistance levels can perhaps help with the confirmation of a chart pattern, but more often than not, chart patterns provide little help. Price action should be evaluatated first. That is, major levels of support and resistance should be looked at first.

More than that, money management has to be given an even higher priority. In my own trading, in fact, I've concluded that money management is actually more significant that the particular technical strategy one may use. Taking this approach doesn't eliminate risk, but it can help you to survive when market conditions go completely out of tune with your trading strategy.

And tuning is another challenge to trading. Some strategies do well in trending markets and terribly in ranging markets--or vice versa. And like any other aspect of lag, one can't be sure what the market is doing until it changes and confirms that a previous state--such as a trend--is over. Again, one must look to support and resistance first.

In a sense, trying to identify trends is no different from trying to identify chart patterns. You could just as easily have called this thread "Why does a trend fail?"

Encyclopedia of Chart Patterns - free - http://thepatternsite.com/chartpatterns.html

Wow, some patterns are known to me, but few i have never heard about it. That is really good collection of so many chart pattern. Thanks for sharing.