P&P: Patterns & Priceaction

[Vodkaa]

Hi there.

First and foremost some backround informations about myself and my “tradingcareer” so far:

I entered the fascinating world of trading half a year ago. In the first 2 months I just read, read, read (and of course looked at charts) - no actual trading

Like many of the rookie traders, I quickly found out about these “amazing” crossing MA strategies and all that kinda stuff

Didnt took me long to figure out that thats all crap.

Afterwards I tried to create a strategy for the 1m timeframe (very technical) with the help of some more expericed traders. I was seeking for an “action-approach”. My latest backtest results (I spend weeks on) showed decent profit (spread inculed), but Im sure, I was careless from time to time. Also slippage would ve made a great diffrence in livetrading, I think.

I started my 1m-Timeframe-Journey because I thought I could come up with a system that would provide multiple entries within an hour. After 1-2 month of creating this system and erasing all the signals that werent even profitable in the backtest, I ended up having a system with 1-2 signals per 8-hour-day. Problem with that: A signal wasnt spottable hours before, but instead most of the time it only took minutes to set up.

So in conclusion the charts would have needed my full attention (no break) for an 8 hour day, only to spot 1-2 signals. That wasnt the plan, I had, as I tried to beat the 1m timeframe. Further I tought, its kinda stupid to trade the 1m timeframe, only to trade 1 signal a day - I could make 1 trade a day happen pretty easily on a higher timeframe with less noise and better signals. And ulitmately due to the fact that I had very slim stoploss and targets, my positionsize had to be fairly big in order to be able to risk more then 1%. That caused margin problems very fast, makin it often impossible to open more then 1 trade at once.
So I dismissed the plan of trading the 1m timeframe before even starting to forwardtest it.

Frustrated spending 2 months on nothing I took a 1 month break.

After coming back I made a new plan. Trade a system that consists of the 2 following criteria:

• No need to look through all the charts more then once every 2-3 hours
• Trade maybe 1-2 trades per day average.

Since I spend so much time on the 1m timeframe, I had no clue how to make trades on the higher timeframe or how to find good setups.
So I spend weeks learning about priceaction and eventually found out about patterns too. I was reading every article and watching every video on those two topics, I could find.

And now, that I am feeling educated enough, I think its better to learn from my mistakes, then from another video or article that just repeats stuff, I already know, with other words.
But since Im tired of backtesting, I think forwardtesting is the better way to go for me currently.

And that what this thread is for.
I dont wanna be alone with my thoughts and even more important, I need some sort of motivation. I think a thread here is the right step.

I hope many of you give me some thoughts on the setups I am goin to post, and of course you can also post setups on your own if u want.

And if you are a patter or priceaction trader you might find one or two setups here, you can trade on your own - you never know

Currently I already have a basic trading plan for my pattern-trading - i will start with that tomorrow - But I still need one for my priceaction trading. I will work this out over the weekend.

Pattern-wise I will shoot you the important information on which and how I am going to trade, later this day.

[Vodkaa]

[U]Thoughts & other Stuff [/U]

[I]I think everybody who trys to find information about those patterns will stumble about jason stapelton eventually. So a big portion of my tradingplan is heavily inspired by his work and his rules on trading those patterns. [/I]

My main focus in the next weeks/months* is to identify those pattern on a daily basis with consistency. I dont really care much about stoploss and especially not about targets. I know Jason often recommends a two target setup, but for me(and with a demo account) thats just a waste of time, because the process of managing the trade this way, is far more timeconsuming then a simple 1 target setup.
I will record every trade anyway, so it ll be easier to just look back later and test how different targetsetups would have played out.

For now I will just place my stops based on my rules and shoot for a target that has an equally amount of pips, for a solid 1:1 RRR. I wont move stops and I wont move targets. Simple and timesaving.

Tho I have looked for those patterns on many years of chartdata and I am confident that they work, I still wanna trade with a demoaccount first, to make sure everything is working as planned. I am not in a rush.

My goal weather archievable or not is (after becoming profitable) a ROI/month of 5-10% average
[U]Personal opinion:[/U] I think the biggest problem for many ppl (that start trading) is overtrading. they think they have to spend 8 hours a day infront of the charts, trade low timeframes and make 5-10 trades a day, to make a good profit.
But the problem with that is, that they often have very low sucessratio with those minor signals, like 50-55% at 1:1 RRR or worse if the shoot for a better RRR. This results in a greater chance of bigger drawdown- and breakeven-periods. Stuff rookies often cant handle well. In addition ppl are so focussed on extracting money on the lower timeframes, that they miss out on the really good trading chances. Simply because they are watching too many timeframes, too many charts and having too much on their mind.

[U]The following point of view is highly hypothetical and theoretical (keep that in mind):
[/U]
But look at it this way: 10% per month average are 120% a year(not including compound intrest) If u are trading forex and only the pairs that include the big currencies (AUD; CAD; CHF; EUR; GBP; JPY; NZD; USD) you have already around 30 pairs to look at (thats my current portfolio). If you are planning on trading the daily and 4h timeframe only, then there are also some exotic pairs that could be worth watching, depending on the spread of your broker and the liquidity. And with stocks and commodities you could bring your portfolio easily to 60 or more instruments.

One would say: “watching 60 instruments? thats impossible”. And to be fair, yeah, sure its hard(depending on your tradingapproach). But I am talking about the daily and 4h timeframe only. That are 2 charts per instrument and if, for example, your trading approach would be those patterns, you would only need a 20-30 sec view on each instrument every few hours or even days. Further u can easily put most of the instruments aside for a week or more, simply because its not possible that a pattern will form in this period of time. So its actually not that hard to do, i believe

But whats my point

Even only with those 30 forex pairs(I am currently watching) you have 30 markets to look for good setups. Meaning if you have a goal of 120% a year you would need 4% per pair a year.
70% successratio for a tradingsignal with a 1:1 RRR is not too unrealistic to aim for I think, so with a Risk of 2% per trade that would result in 0.8% per trade
That means, you would only need 5 trades to gain those 4% a year (average).
[B]So its enough to look for ONE good setup on each pair within a 2,5 month period. [/B]

You can basicly sit and wait for a perfect setup within this period and you clearly dont need to watch all those low timeframes cuz you only need 1 fking trade per pair every 2,5 months.

I already know from my last 2-3 weeks of inconsistant trading that watching those 30 pairs is not that hard (if u dont drop down further then the 1h or 2h timeframe and espically if you are looking for pattern mainly). So I am already planning on looking for more markets and instruments to add in the future. Ideally in other markets(not forex) since correlation is also a factor you need to keep in mind.

---

Enough blabla, nobody needs, from now on

Lets get back to Patterns. But before that, I wanna talk a little bit more about my chartsetups. because thats something tradingschools, tradingbooks and whatsoever usally dont talk much about. They just focus on the content, on how to trade.

They just give you the plan how to build a house but dont show you how to use the tools to do this.

I use ninjatrader and I never used anything else really, so I cant say much about the benefits compared to other plattforms, but I never had any complains about it or wanted to do something I couldnt.

A function of ninjatrader I ve been playin around in the last couple of weeks are the “workspaces”. what this does is, you can save your current chartlayout (including the loaded instruments, the arrangement of the charts, the loaded templates and timeframes). Further you can open another workspace, open other charts and arrange them diffrently or load other templates (maybe for trading rangebars on a lower timeframe for example), but you still have the chance to go back to you old workspace at any time, just by one click.

You can even load multiple workspaces at the same time. and while always one of them is primary loaded, all the others are running in the backround. So if you want to switch to another workspace you need no loadingtime - instead just one click and the current workspace(with all the charts) will disappear and the new workspace with all the charts ready and loaded will pop up within 1 sec.

In order to make my patternrecognition as confortable as possible, I created a workspace for every pair im looking at. Every workspace shows all the relevant timeframes and the informations (patterndrawings) of previous sessions.
With that I am able to jump to every pair, I want to watch, in 1sec. I just need 2 clicks. There is no loadingtime and I dont need to change every single chart to the next pair, I wanna take a look on, manually. its just simple and easy.

Of course there is a little downside, because in order to have no loadingtime at every workspaceswitch I need to preload all the charts at the programmstart - 232 charts to be exact : )

This will cause my programmstart to take around 15 minutes. but from that point on, everything is stable, working and ready to go.

Here is a screenshot of my layout:

Since this post is already long enough, I think, I will continue with my rules for those patterns in the next post.

[Vodkaa]

#patternrulez
hrhr

ok, lets get to it.

I will look for 7 diffrent patterns. 4 of them are still under observation (since im not sure if I wanna trade them in the long run) and 3 of them are settled.

Here is the list:
[ol]
[li]Gartley
[/li][li]Bat
[/li][li]Cypher
[/li][/ol]
[ol]
[li]Buttlerfly
[/li][li]Minor Gartley
[/li][li]Minor Bat
[/li][li]Shark
[/li][/ol]

Lets take a closer look on the ratios and maybe an example to each of one (if I can find one this quickly)

*note: the coloration is on purpose and stands for the diffrent type of pattern. I will keep the colorration in future chart-postings

I know I am not reinventing the wheel. But I think its important to know how I trade them, since you can find so much differing information on that topic, depending where you are looking and whom you are asking.

Gartley
[ol]
[li]AB leg must touch the 61.8 retracement of XA and is not allowed to touch the 78.6
[/li][li]BC leg must touch the 61.8 retracement of the AB leg is not allowed to close “above” the 78.6; C point should be a lower high or higher low.
[/li]
[li]D completion at the 78.6 retracment of XA in confluence with the AB=CD-Pattern within the gartley.
[/li]“in confluence” means looking for AB projection within the CD leg and the 127 extention of the AB leg.

If both those methods point more towards a completion of the pattern at the 88.6 of XA, we will look for the D completion there.
[/ol]
Example; AUDCAD, 4h, 7/13:

Stoploss: 106.5-Extention of AX
Target: 50.0-Retracement of XA

Bat
[ol]
[li]AB leg must touch the 50.0 retracement of XA and is not allowed to touch the 61.8
[/li][li]BC leg must touch the 38.2 retracement of the AB leg is not allowed to close “above” the 88.6; C point should be a lower high or higher low.
[/li][li]D completion at the 88.6 retracment of XA
[/li][/ol]
Example; AUDCAD, 4h, 10/12:

Stoploss: 106.5-Extention of AX
Target: 71-Retracment of XA

Cypher
[ol]
[li]AB leg must touch the 38.2 retracement of XA and is not allowed to close “above” the 61.8
[/li][li]BC leg must touch the 127-Extention of XA and is not allowed to close “above” the 141.4
[/li][li]D completion at the 78.6 retracment of XA
[/li][/ol]
Example; AUDCAD, 4h, 4/13:

Stoploss: 106.5-Extention of CX
Target: 50-Retracment of XC

---

[Vodkaa]

Minor Gartley
Bold part, is the one, that seperates the Minor-Gartley from the Gartley
The diffrence is a more shallow retracment in order to form point C. Because this form is not the orginal form and is not that “beautiful” I wanna keep is seperate from the “normal” Gartley. But I still want to check if its profitable or under what circumstances it might be.
[ol]
[li]AB leg must touch the 61.8 retracement of XA and is not allowed to touch the 78.6
[/li][li]BC leg must touch the 38.2 retracement of the AB leg is not allowed to touch the 61.8
[/li]
[li]D completion at the 78.6 retracment of XA in confluence with the AB=CD-Pattern within the gartley.
[/li]“in confluence” means looking for AB projection within the CD leg and the 127 extention of the AB leg.

If both those methods point more towards a completion of the pattern at the 88.6 of XA, we will look for the D completion there.
[/ol]
Example; AUDCAD, 4h, 4/13:

Stoploss: 106.5-Extention of AX
Target: 50.0-Retracement of XA

Minor Bat
Bold part, is the one, that seperates the Minor-Bat from the Bat
The diffrence is a more shallow retracment in order to form point B. This results in bigger PRZ, because now the point D is still valid if it exceeds point X. The last completion point of Point D is the 113 extention of AX. Thats why we need a wider stoploss, although we are still entering at the 88.6 retracement of XA.
[ol]
[li]AB leg must touch the 38.2 retracement of XA and is not allowed to touch the 50
[/li][li]BC leg must touch the 38.2 retracement of the AB leg is not allowed to close “above” the 88.6; C point should be a lower high or higher low.
[/li][li]D completion at the 88.6 retracment of XA
[/li][/ol]
Example; AUDCAD, 4h, 4/12:

Stoploss: 120-Extention of AX
Target: 57-Retracment of XA

Shark
[ol]
[li]AB leg must touch the 38.2 retracement of XA and is not allowed to close “above” the 61.8
[/li][li]BC leg must touch the 113-Extention of XA and is not allowed to touch the 127
[/li][li]D completion at the 88.6 retracment of XA
[/li][/ol]
Example; AUDCAD, 4h, 3/14:

Stoploss: 120-Extention of CX
Target: 57-Retracment of XC

Butterfly
[ol]
[li]AB leg must touch the 78.6 retracement of XA and is not allowed to touch the 88.6
[/li][li]BC leg must touch the 38.2 retracement of the AB leg is not allowed to close “above” the 88.6; C point should be a lower high or higher low.
[/li][li]D completion at the 127 Extention of AX in confluence with the AB=CD-Pattern within the butterfly.
[/li]“in confluence” means looking for an extended AB projection within the CD leg and the 1.618 extention of the AB leg.
[/ol]
Example; XAUUSD, 4h, 12/13:

Stoploss: 150-Extention of AX
Target: 104-Extention of AX

---

Thats all the patterns I trade and how I trade them. As I said, stoploss and targets are very basic and not yet optimized.

From tomorrow on, I will start posting emerging patterns fitting those rules, updating already posted or finished patterns and of course displaying bankrollgrowth.

Stay tuned.

[Vodkaa]

Before goin to bed I wanna put my first emerging setup out here. Its on EURGBP on the 4h and its very close before completing.

It has a decent harmonic look and the fact that there are two (nearly perfect) patterns completing is same area, makes it even better. Yes, there are some choppy movements within the arms, but every point is still easily identifiable. in both cases we have a solid impulse leg , and a little choppyness is perfectly acceptable anyway.

First we have an Gartley Pattern completing somewhere in the 8308 area.

Inside this gartley Pattern we can find a Butterfly terminating in nearly the same area (somewhere in the 8310 zone)

Since the Gartley has a bit lower entrypoint (the gartley might complete while the butterfly doesnt) and its the bigger and therefore more relevant pattern, I place my orders based on the gartley rules. But having another valid pattern terminating in the same area is always a benefit and makes the signal even stronger.

[Vodkaa]

EURJPY, Daily, Bat:

Limitorder at 144,60

[Vodkaa]

GBPCHF, Daily, Gartley:

The harmonic look of this Gartley isnt the best, and tho I probably would trade it anyway(because the ratios are very close to ideal), we also have some higher TF analysis that confirms the relevance of the gartley.

On the weekly timeframe (or the daily of you zoom out enough) we can clearly see some sort of upwards channel. it isnt too well designed to trade just the channel itself but with that bullish gartley in a bullish channel we clearly have a good place for an entry.

Further there is a butterfly within the BCD triangle of the gartley terminating (once again) in the same area

In many forms this trade is very similar to the trade on EURGBP, I am already filled - so correlation is definitely a factor to consider here, if we are still in the EURGBP trade when we reach the PRZ here.

[Vodkaa]

Potential Gartley setting up at EURJPY on the 1h. Underlayin trend is bullish, so this could be a good spot to aim for some shorter term profit, if the pattern completes.

[Vodkaa]

Nothing much on the radar for today, i think. There are still a few patterns im observing but doesnt look like, that much will happen today.

2 things i still want to cover. AUD forming cypherformations on lower timeframes on a few pair including AUDCAD and EURAUD

I think the most reliable will be the one on AUDCAD on the 30min. Yes there is a small newsdriven move inside the impulse leg, but the main structure is still intact.
X point is good support zone on the 4h, that keeps the uptrend intact, tho we put in a lower high. So im confident that at least at point X price will find support even if it violates the 78.6 or deeper retracements.

Normally I’d say that the 30 min timeframe is not in my portfolio but I still wanna keep an eye on the lower timeframes in general to see if they are might worth watching sporadically.

Second pair I am watching is the GBPAUD Cyhper/Butterfly confluence similar to the GBPCHF; D setup i posted yesterday.

You wanna keep the correlation in mind since they might get to the PRZ at the same time, but at least you could use this a confirmation for a further increase of the chance for a possible reversal at the GBP pairs in that area.

This weeks results so far: 4 trades executed, 2 winners, 2 still in process.

[rockyroad]

It’s already been shown that the cypher pattern doesn’t give any better results then a 50/50. it was a marketing “pattern” to get people to sign up for a course.

[Vodkaa]

Just randomly sayin they dont work, without any information about who said that or about the studies that proved that, is just as helpful as sayin nothing.