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There are no secret patterns and there will never be one

  • #161
  • Oct 4, 2010 6:17am Oct 4, 2010 6:17am
Quoting mikkom
That depends entirely on your own sophistication.

Heads and shoulders only tells that market has exhausted and not reached the last peak. It's not a pattern that predicts, it's a pattern that tells you about the overall market conditions.
This is right to the point regarding patterns in the market.
Life is a school for the soul
  • #162
  • Oct 4, 2010 6:24am Oct 4, 2010 6:24am
Quoting jag1966
Fantastic post Wavetop, I agree with you wholeheartedly and trade just like you, "waiting patiently for the perfect pattern"

I am sure esuffw titled the thread the way he did to lure people like you out of the sidelines.
Hey jag1966

The title of this thread, I did not choose. Originally it was a much more catching named "95% secret system"... That is why you have this guy on the third post asking for a system!

I think after I posted "no system offered here", the admin or someone else changed the name for me. But I am glad this name of the thread have attracted so many people.

Please read my earlier post regarding "waiting patiently for the perfect pattern".

Good trading to you
Life is a school for the soul
  • #163
  • Oct 4, 2010 6:30am Oct 4, 2010 6:30am
Quote
If the statement: 'there are no fixed patterns' = true, then the logic that makes that statement "true" must then be applied to itself. When you do that, you get: "Patterns don't exist. Therefore, this statement does not exist." As you can see, there is a massive contraction, here. By definition, such a statement would itself be circular and therefore, not very plausible.

Think about it, folks. "There are no fixed patterns," is by definition a "Fixed Pattern" itself. The pattern, is that there are none and such a statement is a pattern...

Broad Patterns are there but what is difficult to pinpoint is the volatility which changes every day.

One of the Broad patterns in S&P 500 futures which i have observed is after a big rally in Asia and Europe, US markets opens gap up. The idea is to go long but the difficult thing to decide is whether to go long right on opening or whether to go long waiting for price to come at previous close.

In many cases, after opening gap up markets starts to increase, in other cases after opening gap up markets comes back to previous close and then starts increasing. All in all trend is up but volatility is different.

This is where feel of markets come handy. What is the 'collective sentiment'? This is where previous experiences comes in handy. There is a broad sentiment pattern but there is no fixed quantitative pattern.
  • #164
  • Oct 4, 2010 6:34am Oct 4, 2010 6:34am
Quote
I have seen years of work going down the drain, simply due to a change in market structure. Their patterns will no longer work, but for some reason, their research held them back from ditching their pattern. It was almost because they have gone into such fine detail analyzing the quantifiable variables that it cannot fail. At the end, they have to bow down to the un-quantifiable factors which drives the market place.

100% truth. Only an informed trader like esuffw can make such a truthful statement.

Because volatility is changing every day there are twist to broad patterns which quantitative analysis is not able to decipher.

Broad patterns are there in market but those patterns needs to be adjusted understanding the current volatility. Current volatility is a good measure of knowing the current participants behavior in the market.
  • #165
  • Oct 4, 2010 6:43am Oct 4, 2010 6:43am
Quote
1.) Promoting the study of MARKET, NOT PRICE (PRICE COMES AFTER THE UNDERSTANDING OF THE MARKET, OTHERWISE IT BECOMES % GAMBLING.) (WITH GREAT HELP OFFERED FROM OTHER FF MEMBERS)

2.) The essences of trading which have been lost during the commercialization of "magic forecasting", which is "TRADE MANAGEMENT, COMBATING UNCERTAINLY".

This is it. Brilliant post

To understand the market/to feel the markets is to understand, learn, revise and memorize the market patterns, behaviors and current volatility. The first baby step is to make a journal of market action. Needless to say, not many traders do that.

The automatic trading is a byproduct of computer processing power which increased dramatically after 1980s. So within the market structure, the automatic traders are also acting on price pushing price up/down.

Once traders starts to understand the market structure, they are learning the behaviors of all types of traders- All of them.

The final garnishing is current volatility. Volatility is changing, so one needs to adapt his/her trading to the current volatility.

Brain is the most powerful PC in an entire universe and the top discretionary traders whom i have met have trained the brain pathways so hard with countless hours of practice that money flows into their account effortlessly just like we drive a car fluently.
  • #166
  • Oct 4, 2010 7:28am Oct 4, 2010 7:28am
Quoting kingfisher
Broad Patterns are there but what is difficult to pinpoint is the volatility which changes every day.

One of the Broad patterns in S&P 500 futures which i have observed is after a big rally in Asia and Europe, US markets opens gap up. The idea is to go long but the difficult thing to decide is whether to go long right on opening or whether to go long waiting for price to come at previous close.

In many cases, after opening gap up markets starts to increase, in other cases after opening gap up markets comes back to previous close and then starts...
Hey kingfisher

Knowing the reason behind the pattern can provide you with an edge. I have heard someone uses this exalt edge to do a few profitable trades per month on the S & P. Let me call up my friend and ask about it.... Brb
Life is a school for the soul
  • #167
  • Oct 4, 2010 7:38am Oct 4, 2010 7:38am
Quoting kingfisher
100% truth. Only an informed trader like esuffw can make such a truthful statement.

Because volatility is changing every day there are twist to broad patterns which quantitative analysis is not able to decipher.

Broad patterns are there in market but those patterns needs to be adjusted understanding the current volatility. Current volatility is a good measure of knowing the current participants behavior in the market.
Please note that I am not that inform. I am still a newbie at my place... (But being the kind of person who spends all his lunch time and break time talking and asking around, I gather information rather quick. Side effects is people try to avoid you as being the annoying one.) But then again, I will rather be lonely then a total failure.

*Frd is having dinner, be back with the answer to the S & P operation.
Life is a school for the soul
  • #168
  • Edited 11:22am Oct 4, 2010 9:16am | Edited 11:22am
Quoting esuffw
Please note that I am not that inform. I am still a newbie at my place... (But being the kind of person who spends all his lunch time and break time talking and asking around, I gather information rather quick. Side effects is people try to avoid you as being the annoying one.) But then again, I will rather be lonely then a total failure.

*Frd is having dinner, be back with the answer to the S & P operation.
okay Kingfisher

Seems that since the DOW JONES futures is overlap Asia close in operation, given that the linkage between different markets is valid for that day. "in another words, real money managers moving the market, not derivatives market makers slaughtering barriers", when Asia is about to end, but DOW JONES seems to lack, you have a likely mis-allocation of money.

Thanks for bringing this up Learn something new everyday
Life is a school for the soul
  • #169
  • Oct 4, 2010 1:26pm Oct 4, 2010 1:26pm
Quote
okay Kingfisher

Seems that since the DOW JONES futures is overlap Asia close in operation, given that the linkage between different markets is valid for that day. "in another words, real money managers moving the market, not derivatives market makers slaughtering barriers", when Asia is about to end, but DOW JONES seems to lack, you have a likely mis-allocation of money.

Thanks for bringing this up Learn something new everyday

Thanks Mate. Sounds Good.

You are lucky to be at the centre of all action. Spending whole day at the trading floor and meeting like minded people is amazing.
  • #170
  • Oct 4, 2010 7:22pm Oct 4, 2010 7:22pm
Quoting Lasker
Patterns do exist, now what are the probabilities of a successful trade based only on just price action patterns?
That's a calculable variable dependent upon the pattern you research/discover, the frequency with which it occurs and the frequency with which it yields a specified number of pips that satisfies your reason for being in the market. Whether or not the pattern repeats, contributes to the increase or decrease in the calculated variable.

Quoting WaveTop
They say: "But, that Bullish Abandoned Baby candle stick pattern failed miserably! I'll never trade that darn thing again!" All the while, stuck inside the H1 chart and never seeing the multiple Bearish Abandoned Baby candle stick patterns forming against the H1 bull, in both Lower and Higher time frames. "Those darn Babies! They just don't work!!!" All the while, never really understanding why.
Quoting Lasker
...go ahead and take the famous head and shoulders pattern, just because the chart just painted that pattern is that going to affect the supply and demand?
How does one know it is not affecting supply and/or demand? Did either supply and/or demand pick up the phone, call you and report it was either influenced or not influenced by the HS pattern? Did they hold a press conference, live on CNN, to report the same?


Quoting Lasker
...What happens if one time frame has this pattern but the higher time frame or lower time frame got a opposite direction pattern?
Quoting WaveTop
They say: "But, that Bullish Abandoned Baby candle stick pattern failed miserably! I'll never trade that darn thing again!" All the while, stuck inside the H1 chart and never seeing the multiple Bearish Abandoned Baby candle stick patterns forming against the H1 bull, in both Lower and Higher time frames. "Those darn Babies! They just don't work!!!" All the while, never really understanding why.

Quoting Lasker
If the big money knows what the small money is thinking wouldn't they take advantage of it and lead them to a trap and then squeeze them?
Quoting WaveTop
With four (4) primary data points (OHLC) per bar and as many time frames as one can imagine, the number of repeatable patterns are nearly infinite. Yet, the trader needs only to fine just one, in order to be consistently profitable.
So, how many patterns that the "big money" knows nothing about, would they need to track? And, how likely is it that someone can track that which they know nothing about?

Quoting Lasker
Isn't trading more an art than a science?
If it were, I would certainly not want to be in this business. There would be far more less stressful ways to net a living. Of course, this assumes that patterns themselves are inflexible and the rules that define patterns can't be flexible, which itself is folklore and fallacy.

The real sophistication behind trading systems, reside in their level of adaptability to market changes and variable market conditions. Those are elegant trading systems that are anything but rigid and overly conformal. They are in fact, Artisans of the market, themselves. Thus, a simple H&S pattern (to continue the example you use) would be merely a singular input, into an array of inputs who number is larger than that found in a singular pattern, itself.

Multiple inputs, from multiple dimensions and multi-time frames, into a multi-algorithmic system [engine] generating variable output, from which filtered probabilities can be derived, leading to a calculation of high density probability trade outcomes.

More art than science? Gee, I sure hope not.
  • #171
  • Oct 4, 2010 8:09pm Oct 4, 2010 8:09pm
Quoting esuffw
I have seen years of work going down the drain by some so called "pattern reading", simply due to a change in market structure. Their patterns will no longer work, but for some reason, their research held them back from ditching their pattern. It was almost because they have gone into such fine detail analyzing the quantifiable variables that it cannot fail. At the end, they have to bow down to the un-quantifiable factors which drives the market place.
Here's the things to keep in mind. A pattern can be found anywhere you look. The blot cloth test proves this. Or, the cumulonimbus cloud game proves this just as well. People see what they want to see, often times. However, the issue is not whether or not patterns exist. The question is whether or not repeatable patterns exist and by definition "repeatable" means, "repeatable." So, that includes patterns that consistently repeat in Bull, Bear and Flat markets, as well as in all time frames - or at least a significant range of time frames. And, the answer to that question is a resounding - Yes.

The other very important thing about patterns, is what are the conditions that cause a pattern to not repeat consistently. If those conditions can be found or discovered, then one has just found/discovered a pattern about another pattern. And, that is called Dependency - as one pattern "depends" upon the conditions of another. This is one of the most powerful concepts in pattern recognition, but too few traders are interested in why a pattern fails to repeat logic, when that logic could be the very thing they were searching for.

If you find "a pattern," and then find "another pattern" that explains why the first pattern fails to repeat, then you've just closed the the loop on what you thought was a failing pattern. All of a sudden, the failed pattern, becomes the successful pattern.

The ability to close the loop on a pattern, is pure genius, because it provides you with the lead-in to the pattern itself. And, if you can consistently see the lead-in to a pattern, by recognizing its Dependency relationship to "another pattern," then can get in front of the market just enough to ride the coming wave.

Einstein, said [paraphrasing]: "No problem can be solved at the level at which it was created."

If the pattern is to have meaning and relevance, then it must be understood from within a different framework. To understand this pattern in "this time frame," you need to understand "another pattern" in a "different time frame," in order to verify Dependency between the two. If there is a Dependent relationship, then you have a chance to close the loop. From that point forward, the only thing that matters is whether or not the patterns contains enough clearance to yield the number of pips necessary to meet your revenue goals - or the reason for you participating in the market in the first place.

If the answer is no, then find another Dependency relationship between one or more patterns until it does. The Dependency relationship can be intra or inter time-frame, just as long as there is some kind of dissimilarity in either Time, Pattern or preferably, both. This will also help to decrease the odds of someone else finding and working the exact same pattern dependencies that you have.

The more dependencies you find, the stronger the loop gets and the higher the probability of repetition. However, dependencies don't just jump out at the trader, or fall into their lap, on average. More often than not, the trader will have to work very hard to locate the intersection between one or more patterns and the logic of their relative dependency.

Once you find the intersection between the two, convert the intersection to a price level, determine whether the market is above or below that price level, and then target that level - making sure there was enough room between the entry and the intersection to satisfy your revenue needs.

You can open just about any chart and find a Principle pattern. However, you will have to work to locate the sub-context of the Dependent pattern, if its exists, for that particular Principle pattern. Keep a library of all pattern discoveries, regardless of whether or not you found the Dependent pattern that unlocks it. You never know when you will discover the next Dependent pattern, that works with some Principle pattern you previous discovered.

This is where the hard work comes in, and this is why so many just give up trying. Or, declare that patterns don't exist at all. Its not that the patterns themselves does not exist. Its that they have yet to discover the key to the Dependencies that unlock the patterns they have already found.
  • #172
  • Oct 4, 2010 8:35pm Oct 4, 2010 8:35pm
Quoting kingfisher
Broad Patterns are there but what is difficult to pinpoint is the volatility which changes every day.
But, why is that difficult for some and not so difficult for others? A change in volatility is what - a pattern? Is it? How would one know, unless one measures changes on volatility and conducts a study of the same, to determine whether or not a pattern emerges?

I can promise you (lol) that the volatility of the day on certain currency pairs can be mapped right down to the hour, or less. There are certain patterns that predict volatility characteristics, from day to day. Of course, they are my own creations and I'm not selling anything or giving my hard work away - but rest assured, volatility can be mapped with the development and creation of the right tools. (BTW - it is not hard to do at all, once you know what to look for.) So, volatility, is not the hang-up, here.


Quoting kingfisher
One of the Broad patterns in S&P 500 futures which i have observed is after a big rally in Asia and Europe, US markets opens gap up. The idea is to go long but the difficult thing to decide is whether to go long right on opening or whether to go long waiting for price to come at previous close.
If that's the Principle pattern, then you've found a Dependency and figuring out what to do next, is not difficult at all. You have to study and measure the consistent range of volatility between the Open of the Market -vs- Waiting for Price to come to the Previous Close. You can't guess at that - you have to scientifically map it, to the point of being able to determine that variables behavior. These kinds of things are nothing but variable inputs. If you have discovered a plausible Principle pattern, and a plausible Dependency pattern - then you need to apply statistics, so that that you can better understand the range of behavioral outcomes over time.

From that point, making the decision to enter now, or later, becomes easier - because you will have a framework within which to make historically based decisions - as opposed to guessing. But, again, this kind of stuff/data will not merely drop into your lap. You have to build the testing tools and you have to gather the data and do your own analysis.


Quoting kingfisher
In many cases, after opening gap up markets starts to increase, in other cases after opening gap up markets comes back to previous close and then starts increasing. All in all trend is up but volatility is different.
So, is this a pattern problem, or a problem in your expectation of Maximum Adverse Draw using this particular type of trade? The issue here, is determining what the volatility range looks like and behaves like. Then determining whether or not an entry now, is superior to an entry later, in the aggregate - making sure you don't make entries that historically push you too far into your zone of too much adverse draw.


Quoting kingfisher
This is where feel of markets come handy.
My advice - feel nothing in this business. Emotions can turn to fear and fear kills the mind and actually blocks your intuition. Unless you can control your emotions to a very high degree, I'd use less "feel." If, I am a Quarterback standing in the pocket and looking down field as the pocket begins to collapse around me, then I want to use my "intuition" to "feel" the defensive tackle breathing down my neck, and get rid of the ball before I get sacked and take a loss.


Quoting kingfisher
What is the 'collective sentiment'?
That can be coded.


Quoting kingfisher
This is where previous experiences comes in handy.
That too, can be coded.


Quoting kingfisher
There is a broad sentiment pattern but there is no fixed quantitative pattern.
The pattern does not have to be "fixed," it just has to have sustainable structure long enough for you to get in and get out with the number of pips that satisfies your revenue requirements.
  • #173
  • Oct 4, 2010 10:57pm Oct 4, 2010 10:57pm
I have just spent an hour or so following this thread and though all (well most) posts were very interesting nothing has changed my mind. In fact the thread has enforced my belief that there is simply no definitive way to trade currencies. Just as we all have different skin colours, body shapes and attitudes; so too will we find different ways to win & lose. Each must find their own way using resources such as this thread and the experiences of the posters. I know my hour was not wasted, despite my view being unaltered. I have found many jewels amongst the posts - thank you one and all for the input.
  • #174
  • Oct 4, 2010 11:56pm Oct 4, 2010 11:56pm
My understanding on what wavetop saying is the ability to read and participate from "market conditions" rather than single handedly read and trade the so call patterns. And how to do that...Muti time flame?cross pairs?three kingdoms?

Relying on a pre defined pattern alone its like predicting the future movement with past data. What really matters is price movement after your entry and the last price before that seems kind of irrelevant.

imho, money and risk management is the key to cut the edge in the mkt. At the end of the day it is the only thing YOU as a trader can influence after entry. Entry wise I recogn its just best to pick a path with the least resistance. Like what esuffw said follow the biggest money flow on the mkt. When a market maker is going to move the price their best interest before that movement will be likely to try to cover up any hints of whats coming. There is no free lunch and you can't expect someone to constantly dropping money on the floor for you to pick up with ease.
  • #175
  • Edited 4:38am Oct 5, 2010 4:26am | Edited 4:38am
Quoting WaveTop
Here's the things to keep in mind. A pattern can be found anywhere you look. The blot cloth test proves this. Or, the cumulonimbus cloud game proves this just as well. People see what they want to see, often times. However, the issue is not whether or not patterns exist. The question is whether or not repeatable patterns exist and by definition "repeatable" means, "repeatable." So, that includes patterns that consistently repeat in Bull, Bear and Flat markets, as well as in all time frames - or at least a significant range of time frames....
Hey Wavetop

Although we have strong contradiction in our trading style, I can see you are an experienced trader in your field of operation.

Firstly, thank you for taking the time to write such inspiring post regarding interelationships between different market forms.

I won't go into more dicussion regarding patterns (different types of traders operate based on different aspects, even to conduct my daily operation of trading stops is a pattern in itself).

In fact I am more intrested into your personal experience. I believe it can help fore-coming traders to understand more about the game.

Do share with us how you got started, problems you ran into on the way, etc...

Besides you trading approach, HOW DO YOU DEAL WITH UNKNOWN RISK? What is your trade managment approach?

Thank you for taking this thread one step futher

Looking forward to your reply
Life is a school for the soul
  • #176
  • Oct 5, 2010 6:17am Oct 5, 2010 6:17am
Quoting esuffw
Hey Wavetop

Although we have strong contradiction in our trading style, I can see you are an experienced trader in your field of operation.

Firstly, thank you for taking the time to write such inspiring post regarding interelationships between different market forms.

I won't go into more dicussion regarding patterns (different types of traders operate based on different aspects, even to conduct my daily operation of trading stops is a pattern in itself).

In fact I am more intrested into your personal experience. I believe it can help...
Hi esuffw,

Why do some players gun for the stops ? Is it because for them it's a profitable strategy ?, if they have to move the market let's say 50 pips to trigger some stops and they use certain amount of capital to do so, then they can close their position with the stops being triggered so in that way they don't move the market against them when closing the position ?

That means that some players can manipulate the market for a short period of time and move it to some extent especially when the market is very thin ?
  • #177
  • Oct 5, 2010 8:47am Oct 5, 2010 8:47am
Quoting Lasker
Hi esuffw,

Why do some players gun for the stops ? Is it because for them it's a profitable strategy ?, if they have to move the market let's say 50 pips to trigger some stops and they use certain amount of capital to do so, then they can close their position with the stops being triggered so in that way they don't move the market against them when closing the position ?

That means that some players can manipulate the market for a short period of time and move it to some extent especially when the market is very thin ?
Hey Lasker

Have you read them PDF's yet? Think, if you control price. You are the king. Where do you think "GREED" and "FEAR" most shows up? Another words, people who gives you liquidity at a loss or worst price?

Your second question. FRIDAY is a "stops" day. What is the character of Fridays?
Life is a school for the soul
  • #178
  • Oct 5, 2010 9:35am Oct 5, 2010 9:35am
Quoting esuffw
Hey Lasker

Have you read them PDF's yet? Think, if you control price. You are the king. Where do you think "GREED" and "FEAR" most shows up? Another words, people who gives you liquidity at a loss or worst price?

Your second question. FRIDAY is a "stops" day. What is the character of Fridays?
I think the character of fridays will be a closing day positions, players who are in profit don't want to take chances over the weekend so they close their positions.

Fear and greed will show up most in the peaks and valleys ?
  • #179
  • Oct 5, 2010 9:40am Oct 5, 2010 9:40am
Quoting Lasker
I think the character of fridays will be a closing day positions, players who are in profit don't want to take chances over the weekend so they close their positions.

Fear and greed will show up most in the peak and valleys ?
Friday therefore has a t*** market???

Fear = Stop losses
Greed = Chasing prices
(Both are market orders which drives the market at dis-advantaged price)

Ask yourself always. WHERE ARE THE LOOSERS. Only the loosers can provide you with profit. NEVER FORGET THIS FACT. As long as they are loosers, and you traded against them, you WILL WIN.
Life is a school for the soul
  • #180
  • Oct 5, 2010 9:59am Oct 5, 2010 9:59am
Quote
Friday therefore has a t*** market???

Fear = Stop losses
Greed = Chasing prices
(Both are market orders which drives the market at dis-advantaged price)

Ask yourself always. WHERE ARE THE LOOSERS. Only the loosers can provide you with profit. NEVER FORGET THIS FACT. As long as they are loosers, and you traded against them, you WILL WIN.

Good thought process. Since 95% loose, loosers are embedded in market structure.

Lets say S&P future is at 1200 on Monday and it closed at 1180- 20 points loss by Monday afternoon. Within that major downtrend, there will be mini up trends which is made up of loosers.

Example: S&P future reaches 1195 by 10 a.m, then reaches 1198 by 11 a.m- Looser are buying who are not able to determine a major downtrend today.

S&P futures are at 1188 by 12:30 p.m and reaches 1192 by 2:00 p.m- Once again loosers are buying.

This is the reason a graph never go straight up in an uptrend or straight down in a downtrend. The reason being the loosers are selling in an uptrend or buying in a downtrend thus putting temporary pressure on prices.
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