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bakrob99

AB-CD Pattern in Direction of Gap Fill

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This is a setup that I have had success with recently. I really like the concept of AB-CD patterns and measuring the move from A to B with extensions. I watch for trades that form especially in the morning in the directon of a Gap Fill when there is a reasonably sized Gap ... and wait for a Pullback to the 50%-61.8% range. I usually insist on the 61.8% being hit.

 

Then, if I see Volume picking up I may enter at a Bar that closes Above the High of the Lowest Bar in the 50-61.8% zone ...

 

OR

 

Wait to see if price gets momentum behind it, breaks the 100% Recent High and Buy it on a Pullback. This confirmation generally has more risk but more success too. Sadly, you can't have one without the other.

 

I took a scalp early today (for me) at 10:12 and when price failed to go through the High I waited for a larger retracement to form and then realized the AB-CD setup was unfolding. I went for a quick break and when I returned realized I had missed the first entry possibily shown in the chart with the Blue Circle. So I waited for a break of the high an pullback and enter at 832.50 on a limit order for 2 contracts. This price was picked as it was 1 tick above the recent high on the WRB bar at 10:21. But I would have been willing to enter on a Buy Stop at 1 Tick above the 100% Former High shown at 833.00. This was't necessay as I got filled within 1 tick of the bottom and price jumped up towards the Gap fill.

 

At this point I am looking for a 1st Target exit at the Gap Fill price of 835.50 which was hit. Now, I noticed that the YM still had a way to go to fill its Gap so the chances were that the ES would continue at least as long as it took for the YM to fill. This happened to coincide roughly with my 2nd target (the 161% extension) which had a Tick Extreme and I exited again with 1 tick of the top of the move.

 

I wish that all my trades were this nicely executed.

 

If you are looking for a trade setup to may money, Look for repeatable patterns like the AB-CD. I recommend buying Suri Dudella's book on Patterns.

2009-02-13_1053_Todays_AB-CD_Gap_Fill_Play.thumb.png.b838f2b4f7c0648b528615dc20a7d52e.png

2009-02-13_1053_Todays_AB-CD_Gap_Fill_Play_Reason_to_Hang_on_to_2nd_Tgt.thumb.png.cf4defbedc557610ff70228c39a975a0.png

2009-02-13_1053_Todays_AB-CD_Gap_Fill_Play_TM_Analysis.png.9a3fe1812e2fef3c0738c8decaa58ce4.png

Edited by bakrob99

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Good AB=CD explanation and trades, bakrob...

 

All harmonic patterns (Gartley, Buttefly..) and ABC's need to be traded in market context. For me the context comes from Fib. Grid Structure consists of Confluence of Pivots (Floor, FibZone, Globex), FibBands and Market Structures.. I detect ABC patterns (in Real-Time, no-delays) to plot all levels (PRZs, Targets), the formations. There are about 30-40% ABCs NOT tradable and could be randomly forming... They need to have a form and structure (Size, Shape etc..) and building around certain levels. So, market context is critical to filter them out.

 

Here are some of my ABCs captured in Real-Time yesterday and today...

 

Regards,

Suri

ABCBullishTrade_Feb1209.jpg.eef798cc63ae351b27b014d269269a2f.jpg

ABCBullishTrade2_Feb1309.jpg.3909ac6c73135847f25a8f50905b49f7.jpg

ABCBearish1_Feb1209.thumb.jpg.ca7b70c4a9deb8b31c6e3b77cf5253dd.jpg

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Hi bakrob,

 

I do strongly recommend anyone who can develop trading ideas/theories/ write code to build systems/indicators for themselves. It does add strong research sense, hands-on experience and clear trading knowledge. There is also true joy in accomplishment of converting an idea to a rewarding system/indicator.

 

However, there are some drawbacks... Coding can be extensively time-consuming. Even if you have excellent programming skills, if you embark on a wrong trading idea or concept, it could be incredibly frustrating and could take months/years before you realize it was a waste of time. Of course, Programmers will never admit to it :)

 

There are only very small percentage of programmers who can actually trade or want to trade. Very few programmers have Trading domain knowledge and very few traders have programming expertise. Most Programmer-Traders find bugs/issues or random/silly reasons with their own code (during the Trading time) as an excuse to NOT to trade. It is well documented (in Trading Psychology Books/Blogs) and could be one of the reason "Why Can't you Pull the Trigger". I suggest to all my programming/trader friends to separate Trading-Time from Coding-Time... Trade during Trading-Time and STOP and then Code. Never mix-them.

 

I went on a path of writing Gartley pattern (for TS) from public domain code and for 3+ years added patches and random ideas... After 3+ years, I found out that original idea of the public domain code concept was purely WRONG and it will never find right Gartleys. After that, I spent next 2+ years writing Gartley (All X5 patterns) from scratch with my new algorithms and now it will find every X5 patterns with clear trading rules etc. I am still working on it to complete...

 

My current Auto ABC w/PRZs amd Targets pattern took almost 2+ years, 4 completely different concepts/versions written from scratch... But the current version is absolutely my best work to date, and became my bread-and-butter pattern to trade.

 

Regards,

Suri

 

 

 

 

 

 

 

Thanks Suri. I am thinking about buying the Pattern Detector you offer... but I am also working on one myself ...
Edited by suriNotes

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....

My current Auto ABC w/PRZs amd Targets pattern took almost 2+ years, 4 completely different concepts/versions written from scratch... But the current version is absolutely my best work to date, and became my bread-and-butter pattern to trade.

 

Regards,

Suri

 

 

Suri - Does your pattern code offer any hook or way to use it in an automated strategy. For example - can you put your protected code in a Function and allow a strategy to call it and get the value so it can be automated?

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Hi Bakrob,

 

Currently we are working on ABC and X5 pattern based Automated Strategies for TS... A very good friend of mine is working on ABC Auto-Strategy for NinjaTrader using the same ABC algorithms. But we may be far from releasing any functions or strategies.

 

Regards,

Suri

 

 

 

 

Suri - Does your pattern code offer any hook or way to use it in an automated strategy. For example - can you put your protected code in a Function and allow a strategy to call it and get the value so it can be automated?

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Next week, I'll be presenting a small session (30m) on "How to trade ABCs" for TradeStation Securities at the TradersExpo in New York city. It would be great to meet you guys, if you are attending...

 

Sunday, February 22nd

2:30pm - 3:00pm "How to Trade ABC Patterns using Fibonacci Grid Structure in TradeStation"

 

Regards,

Suri

Edited by suriNotes

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Hi bakrob,

 

I do strongly recommend anyone who can develop trading ideas/theories/ write code to build systems/indicators for themselves. It does add strong research sense, hands-on experience and clear trading knowledge. There is also true joy in accomplishment of converting an idea to a rewarding system/indicator.

 

 

I have to second that strongly. Also by coding you introduce rigour into your definitions which on the whole is a pretty good thing.

 

Personally I find the 'symmetries' and 'geometries' in the market remarkable.

 

Anyway as for AB CD's a good place to look for them is in a corrective leg of a larger move. The entry can then be taken at the D point back in the direction of the larger trend. Not quite what is being presented here. There is a piece of trading software that has this as its main premise.

 

Another consideration with this pattern (and many 'geometric' patterns) is that it gives a projection in price and time. Not a bad thing to be aware of.

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BlowFish,

 

I agree with you on Market Symmetries and Geometries..

It is really amazing how they work.

 

Bryce Gilmore, Larry Pesavento, Michael Gur, J.D. Hamon and

Scott Carney (to name a few...) have done phenomenal work

on Market Symmetry/Geometry.

 

Here is a pattern confluence of ABC Bearish and an example of Time projections (using TS Fib. Time Extension Tool)...

 

Price is the most valuable information in all research. But 'Time' fascinates me more than 'Price'. Wish I had more 'Time' for my research :)

 

Regards,

Suri

 

:::

Personally I find the 'symmetries' and 'geometries' in the market remarkable.

::::

Another consideration with this pattern (and many 'geometric' patterns) is that it gives a projection in price and time. Not a bad thing to be aware of.

ABCBearish_Feb1609.gif.ff25f93048716ee99fb3fb6c305288c5.gif

ABCBearTime_Projections.gif.e90d1aa961e4c931c97f29b0ebe1f9bc.gif

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Here is how Auto-ABC worked with Time Projections...

 

Regards,

Suri

 

 

BlowFish,

 

Here is a pattern confluence of ABC Bearish and an example of Time projections (using TS Fib. Time Extension Tool)...

 

Regards,

Suri

ABCBearTime_Projections.gif.c43f0b2d8363e8c216ed18ba1b436d46.gif

ABCBearTime_Projections1.gif.9c9907f52f3490d9eca3ea7512330442.gif

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Suri - I too have been a big ABC trader for years... I was just curious what you were using to trigger entries? Entries always seem to be the most important, avoiding catching the falling knife.

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Hi daedalus,

 

Yes, Entries are very important.. A planned Entry leads to a Planned Exit...

 

I use an entry algorithm to compute and mark EntryLevels on my ABCs (see EL levels on the chart. It will also compute/mark STOP levels). Depending on various types/sizes of the ABC, this EL can be 2BarHigh/Low +/- rangebased ticks or Wide-RangeBar H/L + rangeticks... On Daily bars I use slightly different algorithm, using Gap H/L + rangeticks or Wide-RangeBars H/L etc.

 

Regards,

Suri

 

 

 

 

 

Suri - I too have been a big ABC trader for years... I was just curious what you were using to trigger entries? Entries always seem to be the most important, avoiding catching the falling knife.

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