Description Description Trade Chart Patterns Like the Pros is basically an encyclopedia of everything technical analysis. The book has more than 60 different unique and common patterns explained in detail; the greater majority with a focus on day trading. There are hundreds of Technical Analysis books and only a handful will ever help you make enough successful trades to recover the purchase price. Trade Chart Patterns Like The Pros by Suri Duddella is one of those rare opportunities to build a base of knowledge that can take you further each time you trade. Teach a man to fish and you feed him for a lifetime.
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Cup-and-Handle How many chart patterns are there? Should we treat them all equal or do some have higher odds of success than others? Continuation patterns continue in the direction of the previous trend after a brief consolidation. Examples of continuation patterns are ascending triangles and symmetric triangles.
Reversal patterns terminate the prior trend, reverse, and begin to trend in the opposite direction. The study of these patterns is essential for traders as they provide various opportunities to analyze price and trade for profits.
Most pattern structures are bound by supply and demand lines and trendlines within key support and resistance levels. Some of these chart patterns are more frequent and easier to detect than others.
Fortunately, it is not essential to know all of these patterns to be a successful chart pattern trader. Knowing just a few and mastering their specific conditions of how they succeed and how they fail are all most traders need. Pattern success greatly depends on their underlying market context.
Patterns must be studied for their location, size, symmetry, and existing trends. Some patterns have higher success in trends than in sideways markets and others do better in sideways markets.
The automated algorithm I developed waited for eSIX to confirm trend and the ABC bullish pattern and entered into a long trade around The stop level is below the red stair-step lines at The strategy exited the half contracts 3 at and the trailing stop was also raised.
When price closed below the TrailStop indicator level , the second target was abandoned and the trade was exited. I look for charts which have both cup and handle formations so no trade was initiated. Upon reaching the first target, the energy sector started to correct. Within two weeks, SWKS started to retrace back into the handle structure. The benefit of ABC bullish and bearish patterns is that they show both price and time targets which help when structuring option trades. What do you think most people get wrong when trading chart patterns?
Any common mistakes you see beginning pattern traders make? I believe some of the most common mistakes made by traders is that they do not fully understand the pattern structures, their validity, and their formations and execution rules. I also think many traders force patterns when they do not actually exist.
Traders should first fully understand chart patterns and how they form and how they fail. In my view, many academics and analysts perform a basic research only on chart patterns and publish erroneous results on their merits and demerits.
Very few of these academics are true practitioners of what they write hence they never truly account for market context or market internals when qualifying and validating chart patterns. Traders need to be more cautious about their pattern testing methods and results.
Any final tips or advice you now know after trading thousands of patterns that you wish you knew when you started? Patterns are reliable and repeatable structures, but patterns are also fallible. Patterns form, fail, and reform.
Patterns also morph from one structure to other. Automation is highly recommended as human brain and eyes can trick traders to identify non-existing patterns. If using naked eye, patterns must be clearly visible. Do not force them. Traders need to really understand pattern nuances and workarounds to find success. Patterns must be traded with underlying and supporting market context rather than trading chart patterns by themselves.
It would be great to know and master just a few chart patterns. Study and understand the market context surrounded by chart patterns first and then analyze the patterns. I was most surprised about the level of detail and precision that goes into properly classifying chart patterns.
I now know that I am guilty of too quickly sticking a label on price formations without giving enough thought to things like symmetry, slope, and the overall time it took to form each piece of the pattern. Seeing how Suri uses automation and a collection of technical indicators to classify and qualify his setups really makes a whole lot of sense and shows how experienced traders approach this discipline.
I hope you found this interview as helpful as I did and if you do want more educational lessons just like this, be sure to check out our learning center. To find out more about what Suri is up to, check out his website at Surinotes. Thanks so much for reading and good luck out there.
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Siri Duddella Trade Chart Patterns like the Pros