TRADE PRICE PATTERN - THE PARAMETERS OF EACH PATTERN

Here are the 4 basic parameters of a classic price pattern:

1- Failure rate

If you see a pattern on the chart, how much is it that the price will fail to rise or fall with that pattern?

2- Average growth/decrease in price after a break

If a pattern breaks, how many% will the price go up or down after it breaks? Knowing this you will find a more reasonable take profit point.

3- Rate of adjustment after breaking

A broken pattern, how much is it that the price will correct after the breakout to give us a chance to enter a second command?

4- Percentage of hitting the target by model

And after the pattern goes as planned, how much% is it likely that the price will hit its target?

Knowing these parameters, you will become an expert in each pattern and have a much higher chance of winning, compared to just trading blindly according to the pattern.

TRADE PRICE PATTERN - DOUBLE TOP

The following data are drawn based on 1719 trade:


  • Failure rate: 27%, this means that after 100 trades with double top, about 27 trades are failures, and the rest are profitable. Thus, this is a very high probability pattern, worthy of choosing to trade;
  • Average post-break down price: 14%. Don't take profits too soon, wait for the price to drop about 10% and then start taking profits gradually;
  • The rate of% will be adjusted after breaking: 63%, that is, in 100 breaks, 63 times the price recovers the breakout point after that. So if you miss the initial break, there is also a chance for the second time;
  • Percentage of hitting the target: 45%, about 1/2 of the time. Therefore, there should be a reasonable profit-locking strategy to avoid converting profits into losses.

In the following pattern onwards, you will know by yourself how to apply the trading strategy according to the parameters. 

TRADE PRICE PATTERN - V TOP PATTERN

Parameters based on 2416 trade:

  • Failure rate: 29%;
  • Average discount: 15%;
  • Adjusted% rate: 56%;
  • % Of hitting target: 37%
TRADE PRICE PATTERN - V BOTTOM PATTERN

The following data are based on 1997 trade:


  • Failure rate: 19%, this pattern has a very high win rate;
  • Average gain: 39% after breakout, a gap good enough to make a lot of profit;
  • Rate of pullback after breakout: 55%, more than 1/2 of the number of times the price will recover after a break;
  • Hit 100% target rate: 52%, a very good number for high profit expectations.

TRADE PRICE - HEAD & SHOULDER

The following data are based on 2800 trades:


  • Failure rate: 19%, very low for a reversal pattern;
  • Average bearish: 19% after breakout, not very high, ie the return on each winning pattern will not be as high as the two top/bottom or V top/bottom;
  • The rate of reversal after breaking: 68%, most of the time, the price will adjust for you to enter the second order;
  • Percentage of hitting 100% of the target: 51%, just enough.
Through this we see that head and shoulders are not too attractive model to trade, especially when comparing its down rate compared to the two-peak or V top model.

TRADE PRICE PATTERN - WEDGE PATTERN (PENNANT)

The wedge can be either an increase or decrease in price, so we include 2 in this section.


The following data are based on 700-900 trades:
  • Failure rate: 54% (price increase) and 56% (price decrease), this failure rate is quite high;
  • Average increase / decrease in price: 7% (increase) and 6% (decrease), not very high;
  • Rate with reverse pull after break: 57% (increase) and 63% (decrease), in most cases there will be an adjustment;
  • 100% of target hits: 34% (increase) and 30% (decrease), pretty low
These are two unattractive pattern to trade, in terms of their unattractive parameters.

TRADE PRICE PATTERN - CUP & HANDLE PATTERN

This is the classic pattern of William O'Neil, used to select stocks preparing to grow after an accumulation period. But today this model is also applied in most other financial markets as well.


The following data are based on 912 trades:
  • Failure rate: 5%, this is a pattern with 95% probability of winning;
  • Average price increase: 52%; very high;
  • Proportion with reverse pull after break: 62%, quite often, this sometimes spoils the shape of the pattern;
  • 100% target hit rate: 62%, very high.
This is a very trade-worthy pattern, the parameters are very good.

TRADE PRICE PATTERN - ASYMMETRICAL TRIANGLE

The isosceles triangle can cause prices to rise or fall, so we include both in this section.


The following data are based on 1000 trades:
  • Failure rate: 25% (price increase); 37% (discount), so should choose the model of price increase to trade more;
  • Average price increase / decrease: 34% (increase); 12% (decrease);
  • Reverse pull rate: 65%
  • Target 100% hit rate: 58% (up); 36% (decrease).
TRADE PRICE PATTERN - FLAG PATTERN

We include two types of flags up and down in this section. The following data are based on hundreds of trades:


  • Failure rate: flags increased by 10%; flag down 8%; This is a pattern with a high probability of success
  • Average increase/decrease in price after breakout: increase 10% and decrease 8%, so that the rising flag offers higher potential for profit
  • The rate with reverse pull after breaking: increased 53%; the decrease is 60%, most of the time there is a reversal wave after the break so you don't have to rush
  • Percentage of hitting 100% of targets: increased by 53%, and the reduction is 60%
This pattern is quite good for trading at a rate of reaching 100% of the target more than half of the raffle, so it is enough to make a profit in the long term.


TRADE PRICE PATTERN - ROSS HOOK PATTERN

This is a new model for everyone. Basically, it is quite similar to the up / down flag pattern, here we have a structure of 1 upside down wave and 1 downward correction slightly, a BUY entry when the nearest swing high is broken up.


This pattern has not been statistically yet, but its shape and structure are quite similar to the rising / falling flag, so it is highly likely that its statistics are similar to the flag pattern. This is a reliable and frequent pattern, so it also deserves to be chosen for trading.

TRADE PRICE PATTERN - RECTANGLE

The rectangular pattern is trading ranges - price range sideways. We will look separately for a rectangular pattern in a bullish market; and a rectangular pattern in the bearish market.


Rectangular pattern (in bull market):

The following data are based on hundreds of trades:
  • Failure rate: 15% with bullish pattern; 24% with bearish pattern. We are looking at the bull market so of course, bullish pattern will have a higher winning rate
  • Average increase/decrease: increase 47%; 26% off, reasonable in bull market
  • Rate with reverse pull: 65% with bullish pattern; 66% with bearish pattern
  • 100% target hit rate: 78% with bullish pattern; 56% with bearish pattern
Bear market rectangular pattern:
  • Failure rate: 15% with bullish pattern; 34% with bearish pattern
  • Average increase / decrease in price: 51% increase; 13% reduction
  • Rate with reverse pull: 66% with bullish pattern; 65% with bearish pattern
  • 100% target hit rate: even in a bear market, an upside pattern has a 100% hit rate of the target up to 78%; with a bearish pattern of only 54%
TRADE PRICE PATTERN - PRICE CHANNEL


A price channel is a pattern that will be broken very often, but a compromised price channel does not necessarily mean that the pattern has failed. Maybe we can draw another price channel. Hence we do not have any data on Price Channel breaks, because the Price Channel is flexible and can re-draw in many cases.