Whats the obsession with systems? Why dont more people pattern trade?

[Rupert206]

Nearly all the posts I read are about systems. Everyone wants a system. Usually one thats based on some indicators and rules etc...And then you hear that no system continues to work all the time and needs to be adjusted.

If thats the case then why do not more people trade price action and patterns only?

There are a few very reliable chart patterns that can be applied to intraday charts that have a high success rate and yield a good amount of points.

Despite this everyones still looking for a system based on some indicators or whatever. Why doesnt everyone go back to basics and trade what they see? Thats price action, support/resistance and use chart patterns for entry/exits.

No wonder 95% of traders lose. Its not supposed to be that complicated. Those who are loosing, I suggest take a step back and remove those rose tinted spectacles. Watch the market long enough and trade using the chart patterns and you will acquire something that cannot be taught.

Its called subconscious market knowledge. Use chart patterns and let the SME apply itself and you will reach a level where you know where the market is going before it gets there.

Obviously you will be wrong on occasions, but with good money management you will be able to keep losses small.

Stop looking for the holy grail indicator or system. There isnt one. Imo the way to trade described above is the closest anyone will get to a holy grail ever, yet very few people trade using only the basics.

Baffles me..

 

[pengeshark]

Hi Rupert206, I agree with you totally, with good money management and trading with the trend I have found that using simple patterns such as ' Head and Shoulders' 'Triangle patterns' 'Trend lines - support resistance' give high probability trades and over time can yield good profits. I can also recommend a book which gives statistical probabilities of trading certain patterns 'Encyclopaedia of Chart Patterns by Thomas Bulkowski.

 

[leonlorenzo]

Hi,

This is my first post on this Forum but Ive been a member over at FF for a couple years. Would you mind me posting your opening post over there?

Dont worry Ill mention who and where it originated from.

Leon, Uk

 

[RedGreenBen]

Nearly all the posts I read are about systems. Everyone wants a system. Usually one thats based on some indicators and rules etc.
Baffles me..

Don't give the game away! I spent months working with increasingly exotic indicators before the 'penny dropped'. Price action, trend, support, resistance. It's that simple (and difficult).

Ben

 

[lote_tree]

I've seen trading systems using indicators work and plain old chart reading work. I actully do both. I'm not loyal to any technique unless it adds real value to my trading. There are million ways to skin a cat, some are more efficient than others.

Peace...

 

[Rupert206]

leonlorenzo - yes feel free.

Yes agree there are different ways to skin a cat. But do you really need a food blender, fork and a sieve to skin a cat or would it be easier just to use a sharp knife? The point im trying to make is its hard enough already applying the money management, discipline etc...do you really need more complications when its not neccessary?

 

[Rupert206]

Trading is about finding an edge and continuously exploiting it. What better edge to have than that gained through the use of trading simple chart patterns? Simple chart patterns that work. That i know work. That are so simple to spot yet no one uses? So simple yet they have an extremlely higher accuracy rate...that no indicator can EVER match.

Price action presents itself in the form of chart patterns. It shows what market participants/the collective crowd are doing. The moves after a pattern break are big. You dont scalp for small points when trading patterns. You catch the bigger move.

Therefore Chart Pattern + Money management + Discipline = Consistent profits.

It cant get any easier...but it can get a hell of a lot harder.

 

[westernforce]

It cant get any easier...but it can get a hell of a lot harder.

Exactly. Why over complicate a simple approach?

 

[lote_tree]

leonlorenzo - yes feel free.

Yes agree there are different ways to skin a cat. But do you really need a food blender, fork and a sieve to skin a cat or would it be easier just to use a sharp knife? The point im trying to make is its hard enough already applying the money management, discipline etc...do you really need more complications when its not neccessary?

May be a food blender, fork and sieve are necessary for the individual to successfully trade the markets. Their personality may gravitate to the quantitative approach of trading systems and indicators to make money in the markets. The complications you refer to are a matter of perspective. Those complications may be the 20% that bring in 80% of the profits. I’m just wondering how successful one would be at trying to persuade the world’s richest man to abandon his complex fundamental approach to stocks in favour of simple stock chart patterns like bull flags, triangles and head & shoulders.

Bruce Lee and Jet Li have been revered as martial arts masters. Their style of Kung Fu is completely different yet you’d be hard pressed to pick a winner between them. The point is they would have still ended up as great martial artists even if they learnt different styles because of their exceptional ability to use the tools given to them in a certain way.

Like I said before I’m comfortable with most tools and would integrate them in my trading if I had solid evidence that they contributed positively to my bottom-line.


Peace…

 

[AnEdge]

So I have to ask...what do you consider to be the basic patterns that should be used and how to recognise them ? Because the trick is not doing looking backwards over a historical chart but to be able to recognise them forming during the trading day (if you are trading intraday) so you can enter/exit your trades.

What actual returns are generating on your capital on an annualised basis ? ( I will not ask about risk or bet size versus trading assets)

Thanks.

 

[RedGreenBen]

Trading is about finding an edge and continuously exploiting it. What better edge to have than that gained through the use of trading simple chart patterns? Simple chart patterns that work. That i know work. That are so simple to spot yet no one uses? So simple yet they have an extremlely higher accuracy rate...that no indicator can EVER match.

To be fair, everyone is looking for patterns. In the primary data, as price action, or in derived quantities as indicators. It's a trade-off between any extra value provided by the indicator and the inevitable obfuscation. I just happen to prefer primary data.

It's also important to be clear about what people mean by chart pattern. Some people mean double-tops or descending wedges etc. I mean, and this doesn't exactly roll off the tongue, 'patterns in price that through careful and lengthy observation of this particular market suggest a favorable probability to open a profitable trade'.

Ben

 

[JTrader]

Nearly all the posts I read are about systems. Everyone wants a system. Usually one thats based on some indicators and rules etc...And then you hear that no system continues to work all the time and needs to be adjusted.

If thats the case then why do not more people trade price action and patterns only?

There are a few very reliable chart patterns that can be applied to intraday charts that have a high success rate and yield a good amount of points.

Despite this everyones still looking for a system based on some indicators or whatever. Why doesnt everyone go back to basics and trade what they see? Thats price action, support/resistance and use chart patterns for entry/exits.
No wonder 95% of traders lose. Its not supposed to be that complicated. Those who are loosing, I suggest take a step back and remove those rose tinted spectacles. Watch the market long enough and trade using the chart patterns and you will acquire something that cannot be taught.

Its called subconscious market knowledge. Use chart patterns and let the SME apply itself and you will reach a level where you know where the market is going before it gets there.

Obviously you will be wrong on occasions, but with good money management you will be able to keep losses small.

Stop looking for the holy grail indicator or system. There isnt one. Imo the way to trade described above is the closest anyone will get to a holy grail ever, yet very few people trade using only the basics.

Baffles me..

Thats exactly what i am trying to do. Excellent post I have identified the conditions much akin to what you describe above on a candlestick chart. They work well, i now just need to implement them to somewhere approaching much closer to their full potential. As you say, sure, some trades will continue to lose, but by trading PRICE, every trade you enter, win or lose, will have been for a valid reason.

 

[Rupert206]

So I have to ask...what do you consider to be the basic patterns that should be used and how to recognise them ? Because the trick is not doing looking backwards over a historical chart but to be able to recognise them forming during the trading day (if you are trading intraday) so you can enter/exit your trades.

What actual returns are generating on your capital on an annualised basis ? ( I will not ask about risk or bet size versus trading assets)

Thanks.

Basic chart patterns would be flags - both bull and bear. Also the pennant or any pattern that shows that a range is constricting. They all require visual identification and some discretion needs to be used at times but this comes with market experience.

Once you get that experience and you have a better feel, you can 2nd guess patterns that may develop before they actually do...this gives you added confidence to trade more aggressivley on good setups.

Check my other thread which shows my equity curve. This shows the returns that are being generated by using simple chart patterns.

I have recently decreased position size on the dow from having positions open to the value of £30pp to only £3-£8pp. I trade more agressively on good setups and when the market has more direction...Last month has been very good...

last two days I have only made £200ish on each day, although it has been alot higher than this...but thats because im uncertain of the current conditions with the US elections and it being the start of a new month.

Oh and I dont open a full position on a developing pattern. I know I aint gonna catch the bottom of the setup, but I average in at various points to get a better price. If it instantly starts going my way I can add as it goes or on any pullbacks,.

 

[Rupert206]

I will post some of the setups Ive been taking later this evening..

 

[gamma]

I could'nt agee more rupert206
I do also use indicators bearing in mind that are confirming tools due to their properties.
Yes looking for chart patterns is the way to enter trades and indicators to manage and exit.
Thats the way I trade anyway might not work for everone

 

[njptrix]

Nearly all the posts I read are about systems. Everyone wants a system. Usually one thats based on some indicators and rules etc...And then you hear that no system continues to work all the time and needs to be adjusted.

Baffles me..

I trade just naked charts, no chartpatterns, indicators, nothing!, and i perform extraordinarily well...

 

[Rupert206]

I trade just naked charts, no chartpatterns, indicators, nothing!, and i perform extraordinarily well...

Yup thatsdoable too. I can trade like this as well if I want to but prefer trading patterns.

 

[Adamus]

So does this mean there is no obsession with systems, as the thread title asks? It makes me wonder because I get the distinct feeling that mechanical traders are in the minority on this forum.

 

[cryten]

I see the point your trying to make Rupert but in my experience, I have made highly accurate entry techniques using indicators and have also spent numerous hours on patterns, fibs, pivots you name it and to be honest it's all bunk. Instead the effort put into defining your entry should be on defining your exit. I don't give a flying frack what a traders entry is I'd rather compare his exit.

Just my 2 cents

 

[gamma]

I see the point your trying to make Rupert but in my experience, I have made highly accurate entry techniques using indicators and have also spent numerous hours on patterns, fibs, pivots you name it and to be honest it's all bunk. Instead the effort put into defining your entry should be on defining your exit. I don't give a flying frack what a traders entry is I'd rather compare his exit.

Just my 2 cents

I don't give a flying frack what a traders entry is I'd rather compare his exit.

cryten,
surely some consideration has to be given to the entry
If you don't know why and where you entered it makes your exit as difficult as your entry