PRS - Pattern Recognition System (FAQ)

Trading Systems Free Forex Trading Systems
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[B]Official IBFX - FAQ[/B]
[B]

  1. General Usage[/B]

[U]1.1 What is my Username?[/U]
Your user name is the e-mail address you have on account with InterbankFX. You must have either a InterbankFX Demo or Live Account to use the IBFX-PRS Tool.
[U]
1.2 Can I use IBFX-PRS on multiple computers?[/U]
IBFX-PRS can only be used on one computer at any one time. You are welcome to install the software on numerous computers, but as soon as you have connected from another computer your original connection will be lost.
[U]
1.3 Does IBFX-PRS provide Buy / Sell signals?[/U]
IBFX-PRS does not offer Buy or Sell signals, however it does offer “prediction regions” that you can use as guidelines when trading. These regions are drawn as grey areas for complete patterns and are based on the attributes of the pattern together with the predicate of the underlying theory.
[U]
1.4 What patterns does IBFX-PRS identify?[/U]
IBFX-PRS Identifies the following patterns:

  • Triangles
  • Channels & Rectangles
  • Wedges
  • Head & Shoulders
    [U]
    1.5 How do I interpret the quality indicators?[/U]
    The coloured columns are an indication of the quality of the pattern. They are provided in order to give you an indication of how well formed the pattern is. The recognition engine is lenient with regards to patterns it identifies (it would rather identify more instances than risk missing one), so along with the pattern instance it tries to inform the user of how strong it thinks the pattern is based on these different criteria.
    [U]
    1.6 What are some patterns identified as both Continuation and Reversal?[/U]
    The reason is that over different pattern lengths our recognition engine may identify the preceding trend to be in two different directions. For example, the initial trend in the bars just preceding the pattern may be bullish, but looking a little further back and the direction may be bearish. This is not common, but it happens mostly in patterns with a low initial trend quality.

[U]1.7 What do the yellow bars in the first column mean?[/U]
The yellow bars found in the left column are simply an indication of the latest patterns that have been identified. They do not indicate which patterns are still valid. As a rule of thumb, don’t expect the pattern to predict movements any further than 1/3 to 1/2 of the pattern length.

Yellow bars in the Emerging Patterns section mean that those emerging patterns have recently been identified, or have been re-identified and are therefore still valid.

[U]1.8 Why is the prediction region missing for emerging patterns?[/U]
Only complete patterns have a prediction region. Emerging patterns do not have forecasts. This is in accordance with chart pattern theory.

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[B] 2. Trading Strategies[/B]

[U]2.1 General comments regarding Technical Chart Patterns[/U]
Almost all literature about technical analysis (both printed and online) has a chapter about Technical Chart Patterns. Refer to this literature to learn how to make IBFX-PRS work for you.

As with any trading tool there is no 100% correct way to trade it; chart patterns are notoriously subjective. In general, the longer patterns are more reliable, so trade the 60min, 240min and End-of-Day patterns - the 15min and 30min give a lot of noise. Adjust the minimum quality indicators to insure that you only receive opportunities of the highest quality.

[U]2.2 How do I trade emerging patterns?[/U]
Charting theory states that the pattern should only be traded once a breakout has occurred; not prior to the breakout. The breakout is the confirmation of the reversal or continuation of the preceding trend. If one follows the theory, then the emerging patterns should only be used as a “watch list” - a list of currency pairs to watch more closely for a breakout.

However, many users find that IBFX-PRS is most useful when both complete and emerging patterns are taken into account during the trading process.

You can think of emerging patterns in two ways:

  1. As patterns that may break out in the near future.
  2. As an indication of where the next turning point is going to be.

When trading them as (1) above, they provide an advanced alert of a breakout; giving you ample time to watch the stock in your own trading / charting platform. When trading them as (2) above, they can provide you an indication of when the next turning point in the price can occur.

[U]
2.3 Where should I set my limits and stops?[/U]
IBFX-PRS is an automation of existing chart pattern technical analysis techniques. Providing exact stops and limit levels is impossible because the theory of charting does not cater for this. Chart pattern theory does however provide expected range for the price to reach; this is displayed visually on the IBFX-PRS application via the grey block on the chart. It is the responsibility of the user to decide whether the pattern is of a high enough quality to enable it to reach the desired objective.

[U]2.4 Does IBFX-PRS provide risk/return ratios?[/U]
Chart theory is not a trading system. It only provides an entry into the market (either long or short), but no exact exit time is provided. Therefore, it is not possible to calculate exact risk/reward ratios.

[U]2.5 Can you provide history for the trading success of IBFX-PRS?[/U]
Unfortunately it is not possible to measure the trading success of IBFX-PRS because of the fact that it does not stipulate when to open and close trades. That is, IBFX-PRS is not a trading system, but rather an ideas or opportunities identifier.

The proof of the value of IBFX-PRS lies in what you see. By showing you the pattern on a price graph, it allows you to see exactly what you get. It is not hidden inside a “black box” that just gives signals.