Triangles, pennants, triangles, wedges.... success rate

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new2waix

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Post Number: 189
Registered: 10-2003

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Friday, November 21, 2003 - 03:11 pm:

(Discussion on triangles, pennants)

We all get excited when we discover a 'pattern' emerging on the stock chart, but very often a potential break out turns out to be a break down.

How many times do you find yourself adjusting your charts so that patterns appear when there is nothing really there?

I've read numerous technical commentators comment on chart patterns and there reliability. Some suggest they are an inefficient tool whereas others claim the opposite.

So should we be basing out trading decisions on triangle and wedge patterns?

What is the success rates of triangles that lead to break outs vs. break downs?

andrewk

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Post Number: 96
Registered: 09-2003

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Friday, November 21, 2003 - 05:00 pm:

The idea is to enter the positon right after the pattern has been confirmed by a break (by using stop orders if you don't have the time to watch the price action). I have seen plenty of patterns fail in the last few weeks, but once confirmed they seem to be reasonably successful, albeit with a shortish time frame in mind.

They also tend to be more reliable if they break out in the direction of the trend. Picking tops and bottoms always will be a dangerous game, regardless of chart patterns...

"Logic will get you from A to B. Imagination will take you everywhere." - Albert Einstein

midge

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Post Number: 196
Registered: 10-2002

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Friday, November 21, 2003 - 07:03 pm:

new2waix,

Ascending triangles failure rate: 32% (2% if waited for upside breakouts).

This is quoted from Bulkowski's "encyclopedia of chart patterns".

If you are interested in patterns statistics I cannot recommend this book highly enough. It is the definitive books for patterns statistical information.

Cheers,

MidGe

new2waix

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Post Number: 194
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Sunday, November 23, 2003 - 10:55 am:

Thanks midge for the response.

Those stats are pretty interesting. It proves the importance of waiting for a breakout before you buy.

I may put the book on the x-mas list.

Cheers :-)

new2waix

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Post Number: 206
Registered: 10-2003

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Monday, November 24, 2003 - 10:26 pm:

I just found this great site:
http://www.marketscreen.com/help/chartpatterns/default.asp?Num=152

Click on the 'right hand column' and you can find out the stats of many popular chart patterns.

Here is just one of many --

Ascending Triangle:
http://www.marketscreen.com/help/chartpatterns/default.asp?hideHF=&Num=101

Statistics

Percent of successful formations – 89%

Average rise of successful formations – 44%

Likely rise – 20%

Failure rate - 32%

Average time to throwback completion – 15 days

:-)

midge

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Post Number: 202
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Monday, November 24, 2003 - 11:18 pm:

new2waix,

Indeed, those figures match entirely Bulkowski's. The book goes into much greater details about the statistics.

Of course, if you click on the link statistics on the page (in between the box "Reference" and the box "Help Topics", although it doen't look like a link), you will see that those are based on Bulkowski work.

Cheers,

MidGe

rhen

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Post Number: 65
Registered: 08-2003

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Monday, December 08, 2003 - 12:07 pm:

Would like opinions on this chart.
If i read it correctly we have a substantial pennant, a breakout (upwards as in the long trending nature of cey) then a move of 60c possible.
http://www.incrediblecharts.com/technical/flags_and_pennants.htm

cey

rhen

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Post Number: 66
Registered: 08-2003

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Monday, December 08, 2003 - 12:31 pm:

I guess this fellow, CEY, belongs in the following category.http://www.incrediblecharts.com/technical/triangles_and_wedges.htm

Either way, it is on my watchlist.

regards
rhen

new2waix

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Post Number: 365
Registered: 10-2003

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Sunday, December 21, 2003 - 11:31 am:

I just found another great site:

http://www.recognia.com/reference/patterndescr.htm

A successful double bottom has a 3% failure rate if it breaks resistance!!!

vlt200

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Post Number: 25
Registered: 09-2003

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Wednesday, January 07, 2004 - 11:46 am:

gidday guy

i trade only right angled triangles (yep thats the only reason ill buy into a stock) and have a pretty good success rate. i dont really think its worth looking TOO much into statistical books as i think like some chart patterns, triangles are objective patterns, what i see for example may not be what the next guy sees. This is one of the reasons why i really dont think computer search program can ever beat the good old eyeball scan!

vlt200

deanrosario

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Post Number: 171
Registered: 11-2002

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Wednesday, January 07, 2004 - 11:57 am:

Hi vlt200

I agree that each person can view chart patterns differently - it is art not science.

Have you had any success with triangles for intraday trading?

I would dearly like to have one useful intraday strategy but have yet to find an appropriate way to backtest intraday strategies.

Regards
Dean

vlt200

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Post Number: 27
Registered: 09-2003

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Wednesday, January 07, 2004 - 09:13 pm:

gidday dean

first off i am by no means a day trader, i prefer trading with close prices, But:

i did have a bit of a day trading stint a few months ago. Looking simply for right angled triangles and then entering the stock as the triangle neared the apex by buying either options or warrants (whichever had the tightest spread and good liquidity).

All up my day trading obsession lasted 2 weeks in which time i made 7 traded, 6 profitable and 1 i got screwed with the spread just before close.

why did i quit? Because looking for a relatively infrequent pattern amongst a small amount of stocks day in day out became boring.

To answer your question, yes right angled triangles are an extremely reliable intraday pattern if you have the patience to sit there all day looking for them

hope this helped

vlt200

deanrosario

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Post Number: 175
Registered: 11-2002

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Wednesday, January 07, 2004 - 09:20 pm:

Hi vlt200

Thanks for your comments - I find all insights from those who are actually trading the market very useful.

I'm watching the market all day so I'll have a look at the setup.

As a short-term trader, I know I have to be flexible and change strategies to suit the underlying market.

Thanks again.
Dean

eblode

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Post Number: 16
Registered: 11-2002

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Thursday, January 08, 2004 - 09:40 am:

For new Traders "Top Trader's Guide To Technical Analysis" by Nathan J.Sambul is an easy read. Basic