Price Patterns

[Obsidian 10]

After some years, you start to memorize price movements. My favorite pair is GBP/USD so I watch it more carefully. I noticed that you can see very similar patterns over and over. I will share these patterns, maybe it will be helpful for you too.

 

30M chart

red line is 34 EMA

yellow line is 100 EMA

 

look and the charts and see how gbp/usd usually tests 34ema before it falls (or rises). First example is about bearish setups:

[BlueHorseshoe 10]

After some years, you start to memorize price movements. My favorite pair is GBP/USD so I watch it more carefully. I noticed that you can see very similar patterns over and over. I will share these patterns, maybe it will be helpful for you too.

 

30M chart

red line is 34 EMA

yellow line is 100 EMA

 

look and the charts and see how gbp/usd usually tests 34ema before it falls (or rises). First example is about bearish setups:

 

Hi Obsidian,

 

If you can share any price patterns from your experience that are based purely on price and not upon variable derivatives of it (such as exponential averages) then that would be really interesting.

 

Thanks

 

Bluehorseshoe

[Obsidian 10]

Hi BlueHorseshoe,

 

In fact ema is just a reference point. Maybe someone can find a math formula, ratio etc to reveal the secret behind those price behaviors, not me I am afraid.

 

I use it as re-entry point as well:

[BlueHorseshoe 10]

Hi BlueHorseshoe,

 

In fact ema is just a reference point. Maybe someone can find a math formula, ratio etc to reveal the secret behind those price behaviors, not me I am afraid.

 

I use it as re-entry point as well:

 

Hi Obsidian,

 

It looks as though your basic methodology is quite similar to mine - buying pullbacks in trends (although I don't trade intraday).

 

Through testing, however, I found that using MAs (or any other indicator mathematically derived from price) wasn't the best way to do this. A specific MA length will always prove optimal over historical data, but less optimal in actual live trading. I therefore tend to look for pullback behaviour that can be defined without any optimised variables such as the length of an MA. I was wondering if you have any insights into these types of price patterns within the British Pound?

 

Many thanks,

 

Bluehorseshoe

[mohsinqureshii 10]

Hi BlueHorseshoe,

 

In fact ema is just a reference point. Maybe someone can find a math formula, ratio etc to reveal the secret behind those price behaviors, not me I am afraid.

 

I use it as re-entry point as well:

 

It is very common. In my Point of view the beauty of Technical studies is that there are rules and every trader follow them because studies are same for every trader who understand the Technical.

I consider it like Any Other Profession which is Study base(Doctor, Engineer Etc). Every one doing same stuff but only with his own style.... So don't be afraid...

[MightyMouse 12]

It may be helpful over time to view price as the resulting actions of traders. When you view it that way, then think about who the traders are. Who meaning short term, long term, well capitalized, poorly capitalized, experienced, inexperienced, etc.

 

Then think about where or when each of the traders may enter. So, do you expect long term highly capitalized traders to react on a pull back you see on a 15 minute chart that is really no where in the middle of a daily range? Do you expect a pull back, that you see on anything < daily, to hold when the market you are watching is at the top of a multi month range because of who also may be deciding to take a trade?

 

There aren't simple answers to these questions, and you will get it wrong a lot but you can get them right if you are very familiar with the market you are trading. If you practice, you will be viewing the market as the action of traders instead of the movement of price, and you won't be wondering about mathematical formulas that will reveal secrets. When you do nail what is going on, you will be in the market benefiting from what is going on and more than compensating for the times you were completely wrong.

 

Never forget that we are trading traders. If it were math, then 2 + 2 would always = 4 and that just doesn't happen in the market.

[BlueHorseshoe 10]

It may be helpful over time to view price as the resulting actions of traders. When you view it that way, then think about who the traders are. Who meaning short term, long term, well capitalized, poorly capitalized, experienced, inexperienced, etc.

 

Thanks, MightyMouse - this has been an extremely thought provoking and useful post.

 

Cheers,

 

Bluehorseshoe

[Obsidian 10]

As these patterns occur 30m time frame it is very hard to see the exact price movements. I focus on gbp/usd since 2005 and I see these type of price movements happen often. Trades I took based on these have around %80 accuracy with 30-50pips profit. If happens after failing at a strong resistance, supported with hammer formation, I adjust my profit targets a bit...

 

Every pair has a different behavior and I noticed the pattern I posted happens only on gbp/usd...MA is only helping to identify the pattern. so MA is a part of the system but the system is not based on MA

 

As MM said price is a result of traders' actions. Traders do not change their behavior

 

My long term trades are based on Ichimoku. I will post it next time.

 

ps 2+2= 3 if I am buying, 5 if I am selling :rofl:

[mike21 10]

Hi Obsidian,

 

It looks as though your basic methodology is quite similar to mine - buying pullbacks in trends (although I don't trade intraday).

 

Through testing, however, I found that using MAs (or any other indicator mathematically derived from price) wasn't the best way to do this. A specific MA length will always prove optimal over historical data, but less optimal in actual live trading. I therefore tend to look for pullback behaviour that can be defined without any optimised variables such as the length of an MA. I was wondering if you have any insights into these types of price patterns within the British Pound?

 

Many thanks,

 

Bluehorseshoe

 

Hi Bluehorseshoe,

 

In your opinion what is the 'best way' to enter pullbacks within a trend?

[joshdance 10]

you will be viewing the market as the action of traders instead of the movement of price, and you won't be wondering about mathematical formulas that will reveal secrets.

...

Never forget that we are trading traders. If it were math, then 2 + 2 would always = 4 and that just doesn't happen in the market.

 

Excellent post MM, beautifully said. I was alluding to a similar concept here on another thread when I said this:

 

It's as if they worship the almighty "Price" and bow at his feet. The phrase "price then broke below..." irks me almost equally. Guess what guys? "Price" doesn't do anything. "Price" is not an entity. Now, the market can move up or down, but "price" cannot. Do you understand what a market is? Are you sure? Well, it's not the same as "price," and it's an important distinction.

 

You said it better than I could, but the intent is, I think, the same.

[winstonsmith 10]

A rising wedge pattern is playing out to a "T" right now on crude (my favorite commodity to trade)....I'm not short yet....but have a conditional order in place to buy SCO (if shares of UCO aren't available to short) when /CL reaches $99.50...once crude gets close to, or reaches my target of $85, I'll buy to cover (or sell SCO)....then depending on market conditions...will then go long again

[MightyMouse 12]

A rising wedge pattern is playing out to a "T" right now on crude (my favorite commodity to trade)....I'm not short yet....but have a conditional order in place to buy SCO (if shares of UCO aren't available to short) when /CL reaches $99.50...once crude gets close to, or reaches my target of $85, I'll buy to cover (or sell SCO)....then depending on market conditions...will then go long again

 

We were well on our way to the 60's, or so it seemed, before there was renewed middle east tension. The unknowns related to Iran probably have to play out first.

 

Unknowns = bombings

[BlueHorseshoe 10]

Hi Bluehorseshoe,

 

In your opinion what is the 'best way' to enter pullbacks within a trend?

 

Using patterns that concern price behaviour directly, rather than a technical derivative of it such as an EMA, tends to result in more robust performance, in my experience. This is not to say that the former isn't optimisable or couldn't be curve-fitted but . . . for some reason it is less suceptible to this than the latter. It is one step less 'removed', I suppose.

 

Sadly, however, I don't know the 'best' way to enter pullbacks.

 

Hope thats helpful.

 

Bluehorseshoe

[Obsidian 10]

Another pattern I see on GBP/USD is V shaped formations...price drops (usually more than 70-80 pips) to a level and it starts to rise sharply in a short time. it rises very fast and passes above the highest point before it fell. Therefore they create a very nice hammer formation on longer time frame charts. At that point you understand that bullish momentum is strong and it will bring give you some pips

[Obsidian 10]

today there was a similar example to these V shapes:

[joshdance 10]

Good pattern identification Obsidian. Now, the question is, can you:

 

- recognize these in real time, pull the trigger, and exit with a reasonable profit?

 

Pattern recognition is relatively easy (particularly when you already know the result :wink: ) -- the difficulty, the reason why so few do well, is the inability to execute. That should receive a much larger portion of attention than recognizing patterns, generally speaking, IMO.

[Obsidian 10]

Good pattern identification Obsidian. Now, the question is, can you:

 

- recognize these in real time, pull the trigger, and exit with a reasonable profit?

 

Pattern recognition is relatively easy (particularly when you already know the result :wink: ) -- the difficulty, the reason why so few do well, is the inability to execute. That should receive a much larger portion of attention than recognizing patterns, generally speaking, IMO.

 

Joshdance, I am trying to do but I don't trade full time so there are times that I miss these movements. Recognizing patterns may take time, so I focused on gbp/usd only. Besides I don't know if you can see similar patterns on other pairs. I doubt that.

From the charts I post (all pairs) you can see that I do not use any indicators (except ichimoku clouds). I feel more comfortable when I follow trend lines, patterns.

I will try to post here meantime if I can see any of these patterns.

[turboonostrilvision 10]

It's very interesting these price movements in gu.

It is one of the pairs traded mostly by me. Mostly I do not take decision myself so it is big diferrence.

[fxtrader12 10]

[....] Never forget that we are trading traders. If it were math, then 2 + 2 would always = 4 and that just doesn't happen in the market.

 

Finally, on the 11th try one of the signalling services arrived en plus. The record is:

+60; -60; -60; +30; +67; -67; -43; +56; -51; +53; +59; (total +44)

 

Perhaps trading math is:

 

good + bad = futile (?) or

 

good + good = wait a little longer (?)

[gaoxing 10]

Yeah this is common stop run pattern, but sometimes it will continue. GBPUSD is always a bit more whippy than the other majors in this regard.

 

Another pattern I see on GBP/USD is V shaped formations...price drops (usually more than 70-80 pips) to a level and it starts to rise sharply in a short time. it rises very fast and passes above the highest point before it fell. Therefore they create a very nice hammer formation on longer time frame charts. At that point you understand that bullish momentum is strong and it will bring give you some pips

[Obsidian 10]

... GBPUSD is always a bit more whippy than the other majors in this regard.

 

that is why they used to call it "the beast":cool:

[Obsidian 10]

another similar price movement:

[turboonostrilvision 10]

another similar price movement:

 

Nice formation, and you close to target. There is so many people trading gu.

[Obsidian 10]

another ema34...it was good for 22 pips...

gbp/usd 30m chart:

[joshdance 10]

another ema34...it was good for 22 pips...

gbp/usd 30m chart:

 

Always like to see these things posted as they happen, especially as you are working on 30 minute charts. Anyone can see a good opportunity on a chart AFTER it has happened, but when you see the opportunity happen and post the chart before it pans out, then it gives the perspective for someone reading the post of seeing it as it appears at the right edge, with no hindsight bias.