I am a 100% Patterns based trader. Means, I take trades purely based on a few selected chart patterns
which have the best probability of success at that instant. All my decisions of trading comes
from Patterns which are validated/supported/confirmed by 'Market Context' and 'Market Internals'.
Will write more on 'Market Context' soon. My favorite Chart Patterns to trade: ABCs, Head and Shoulders, Gartleys (all X5), Cup and Handles, Channels etc.
I value and spend more time analyzing 'Market Context' than pattern itself.
'Market Context' is something every trader uses, it is analyzing the market and figuring
the current state/trend/direction of a chart using tools like Moving Averages, Pivots, Trend Tools, and
Volatility etc. 'Market Context' validates a chart pattern/setup. In my view, most traders
use some form of 'Market Context' and usually experienced traders
have a very good sense of 'Market Context'.
'Market Context' supports pattern setups and 'Market Context' cannot (should not) be traded by itself.
I group Tools into two types: 1. Trade Tools. 2. Support Tools.
'Trade Tools' allows you to make trade execution decisions (Entry, Exit and Targets)
where as 'Support Tools' will support and validate Trade-Decisions for Trade Tools.
Few parameters to watch in 'Patterns' and 'Market Context':
1. TREND. This is utmost important as patterns must be traded with its own underlying
trend and Market Internals. I use Trend tools like SuperBars and CMI etc.
2. Size/Orientation/Location: These are kinda tied to individual trade-plan but Orientation
and Location are pretty much based on Pivots and MAs etc.
3. Pattern Integrity/Uniformity/Validity: Basic concept here: A bullish pattern
(bullish legs)must not exhibit excessive bearishness and vice-versa. Pattern
also must be supported by key S/R levels like Pivots, key moving averages etc.
4. Volatility: Most traders cannot trade excessive or risky volatility.
I look for VLTY below 50 for all my new trades and be very cautious once VLTY starts
ticking up above 50. If VLTY is above 100, I will exit all my positions.
5. Execution: This is individual plan and traders skill on how any one enters and exits trades.
All setups must have clear Execution rules and trade protection tools like 'Trail Stops'.
'Trade Tools' in my case are 100% Chart Patterns. I build trade setups using Patterns and Market
Context. These setups are fully validated by 'Support Tools' and only traded in favorable conditions (Trend confirmation, volatility etc.)
My primary trade patterns are: 'ABC', 'Gartleys and all X5 patterns', 'Head and Shoulders',
'Channels', 'Triangles, 'Cup and Handle' and 'Parabolic Arc' patterns. All these patterns have
strict formation and validation rules and have very specific 'Entry', 'Exit' and 'Target(s)'
rules for trade executions.
I use various support tools. Remember No Support Tool is traded by itself.
Most basic support tools are Moving Averages and Pivots (Floor, Globex, Fib. Zone Pivots)
to show key Support and Resistance levels/areas. Support tools include Trend Tools like
SuperBars (to show Underlying Instrument Trend), CMI (Combined Market Internals) and Fib. Bands.
I use 'Trail Stops' exclusively on all my charts to protect my trades. Will write more on Trail Stops later.
ABC, Head and Shoulders, Gartleys (all X5), Channels, Cup and Handle, Parabolic Arc, Triangles
THE RISK OF LOSS IN
INVESTING STOCKS, FUTURES, OPTIONS, FOREX OR COMMODITIES CAN BE SUBSTANTIAL.
YOU SHOULD THEREFORE CAREFULLY CONSIDER WHETHER SUCH INVESTMENTS
ARE SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION, YOUR
INVESTMENT EXPERIENCE AND OBJECTIVES, FINANCIAL RESOURCES AND
OTHER RELEVANT CIRCUMSTANCES. PAST PERFORMANCE IS
NOT NECESSARILY INDICATIVE OF FUTURE RESULTS, AND LOSSES ARE ALWAYS
POSSIBLE. THE STRATEGIES OR TRADE SETUPS MENTIONED
HEREIN SHOULD NOT BE CONSTRUED AS CONSERVATIVE STRATEGIES BUT
RATHER SPECULATIVE AND FOR SHORT-TERM TRADING PURPOSES ONLY.
THERE IS EQUAL OR GREATER POTENTIAL FOR LOSS WHILE USING THIS STRATEGY AND TRADE SETUPS.
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