Journal Take 2 - Chart Patterns

[natureboy]

Day system has me buying Euros right now.. so i'm going long EURUSD based on that system.

 

[natureboy]

I've got basically two approaches. One uses Pattern, Timing, and Support/Resistance for a setup - that could be for a scalp or day trade. The second is my day system which works under the principle that around significant economic releases or time event (cycles) you get trends often enough to profit on balance. These two systems need not always agree, right here they don't.

Only one view will win out - i'm biased down, the pattern is biased down, yet my day system has been tested out, i know it, and unless price dynamics change a great deal i'll make money trading the system each month.

 

[natureboy]

The core order entry for the day system is also via Chart Patterns - using these M&W on tick data - all automated

 

[natureboy]

i'm still expecting EURUSD to head back down, though, at which point the day system will give signals to sell. Could be dead wrong we'll see.

 

[natureboy]

Trend line from Friday's highs, Could be important resistance with all the time targets..



I'm finally going to get that coffee and come back to discuss that M12 on the 4hr - is it failed, or what is the situation there.

 

[natureboy]

First - take a look at Pattern Utility - Many methods look good in a trend, this one is no exception, and even stands out in class. Here's a picture of M Patterns Identifying Lows in the September upswing in EURUSD



Buy Low - these patterns enable that.

Now regarding the 4hr M12..

 

[natureboy]

The Overall Pattern Forms (M & W) found via this indicator are objectively present. The individual pattern manifestations have a small range of possible patterns that are based on sensitivity settings. In cases like this, I use the extreme settings high and low values that still plot the M12.

For example here is the M12 i've been expecting to lead to continuation:



The most bullish setup - the break of the A-C TL - has failed. The more sensitive setting that captures this M12 has also failed, however a slightly less sensitive setting still plots the M12 Continuation Pattern form. therefore, the overall M12 is still in effect. I determine this by using the least sensitive setting that will still plot the pattern.



If this pattern fails, there is no less sensitive setting, so in that case I would move my overall Daily bias to sell Euros. The whole setup could still fail, sure. Then again it may not. Probability! Yes, yes.. It works often enough to allow profitability on balance, as when you hit a winner it often is has large reward to risk.

SO - in my style of analysis, there is still a continuation pattern on higher timeframe EURUSD, it began plotting WAY before the low (if one happens around the Daily 38.2% retrace) happens. In this way the pattern is leading.

Basically - when you have a Higher timeframe pattern, scan through the sensitivity settings to find the smallest and highest values that plot the pattern (takes about 2 minutes). Then you know what the extreme scenario is for pattern failure, in this case the less sensitive 4hr pattern still in effect.

 

[natureboy]

Still Long in EURUSD, looking for a turn back down when i'll get short. If the turn never comes i'm long and trailing higher.

 

[natureboy]

I exited my long - i'm selling short on basis of the Pattern-Price-Time. This is where discretion comes in.. Fading my day system..actually, simply anticipating my day system, as strength could roll bearish on EURUSD any minute now. We'll see if i get a swift beat down or prove well timed at the moment

 

[natureboy]

I'll be back with either the stop out or profit exit, no intratrade updates..

 

[natureboy]

Stopped out on the short. Still looking for limited upside here, awaiting confirmation from the strength/trend rules i use now b4 getting short again.

"I am Jack's complete lack of surprise." - Fight Club - YouTube

 

[natureboy]

The PMI and unemployment will set the tone on this, it may be a big up day..it kind of already has been. Patterns extend and fail, with the TL resistance failing, two time targets only coinciding with minor pauses in the uptrend, and strength yet to roll over.. I'm wishing I was DUMB ENOUGH to stick to my original day rules all the way. Being Right VS Making Money. I've been scalping this thing on the long side since the original short failed. The now W10 pattern is still in effect, however may never lead to a top. Patterns aren't 100% accurate. They are still great trading tools - i've only touched on some of the possible applications in this thread.

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We'll see what response these numbers elicit. Time Window worked well, Day System worked well... my discretion, no.

 

[natureboy]

As always, the market is giving us information. IF bearish patterns begin failing, it is evidence of trend turning up. This has been a big up session for sure. that's why i don't trade only on pattern. They give directional bias, however are not enough solely - they aren't a system. Using Relative Strength is what i do, other technical context can work also - The main advantage of using Patterns is the tight entry to stop loss they make possible. Putting that factor into a trending context and you have big winning trades. Some folks may spurn Reward to Risk, i view it as one essential and malleable component.

The bullish trend is still going on all my charts.. Time targets can readily fail in strong trends, as we've seen today.

All right - rest of this week - i'm not using anything but my day system, however i will be using the exit modification i mention (up 40 pips, put a 25% open profit drawdown stop out on the position).

 

[NVP]

The PMI and unemployment will set the tone on this, it may be a big up day..it kind of already has been. Patterns extend and fail, with the TL resistance failing, two time targets only coinciding with minor pauses in the uptrend, and strength yet to roll over.. I'm wishing I was DUMB ENOUGH to stick to my original day rules all the way. Being Right VS Making Money. I've been scalping this thing on the long side since the original short failed. The now W10 pattern is still in effect, however may never lead to a top. Patterns aren't 100% accurate. They are still great trading tools - i've only touched on possible applications in this thread.

--

We'll see what response these numbers elicit. Time Window worked well, Day System worked well... my discretion, no.

hey N join the Club

a Trader has to be smart enough to set good rules....and then dumb enough to follow them

been there many times......then looked back and asked myself "why didnt I just follow my rules ?" :innocent:

N

 

[natureboy]

Yep it was good advice the first time you gave it. Still true.

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The trend indicator i use has bearish below 1.2883. I tend to see when a big directional day happens.. it doesn't tend to reverse all that often. So, i'm not looking for a downtrend particularly at this point. USD news would need to be exceptionally strong, i suppose. So much EUR strength! still bullish EURUSD, but finally showing the first signs of slowing - relative position of the currency lines provided no leading advantage today. Just following them was the better choice.

Its always tricky! You can get rewarded for doing the wrong things and lose money for doing the right things.. my primitive mid-brain just doesn't get it! haha. I'll make it get it - the rest of the week - No Waffles.



After the short failed, i at least was scalping long, although not using my automation. I'll just do my day system rest of week.

All this bullish action could be the first part of the 4hr M12 Breakout.. Won't be clear until later on, if the rate can take out the last swing high 1.2965 area, then it should be clear for a run to at least 1.3175 area, possibly higher. That's the breakout point now, since the A-C TL failed, have to use swing logic or a HTF Trend indication (you guys know the tool i use for that).

 

[natureboy]

The deal with today's W pattern:

Sometimes leg CD can extend, with the pattern losing any practical value for immediate trading (in terms of how the D point is normally used). CD-extension doesn't happen all the time, when it does its often near the beginning of a new trend opposite to pattern bias. Being aware of this fact is why i knew to start going long after my original short didn't work.



An alternative application, for someone in the know, would be to use the W as a Double Bottom (points A and C). This in fact was the manner Schabacker first described. In retrospect, given the bullish readings from the other tools i use, this interpretation was best today.

 

[natureboy]

Time model has 850 to 1120 as potential. Would make sense with the current EURUSD retracement/consolidation as a possible breakout for an american session push.. we'll see

 

[natureboy]

If we get a weenie push during the american session, this swing my only reach about 2/3 of the london swing. Targets 1.2940 area.. Using my 25% open profit drawdown and trailing..

 

[natureboy]

oof. stopped out at profit..

 

[natureboy]

its at the 50% retrace of the 815 - 900 swing... if its going to move up, it better start soon