Showing posts with label Aksel Kibar. Show all posts
Showing posts with label Aksel Kibar. Show all posts

Monday, May 20, 2024

The 8 Most Common Chart Patterns & How to Trade Them | Aksel Kibar

I've simplified classical chart patterns to the most basic/common 8 patterns. I think most new patterns are derived from those basic ones. Our brains' pattern recognition is not that advanced to focus on so many derivatives. In fact better success can be achieved by narrowing down the below to select few.
 
 
There are 3 Types of Triangles: The symmetrical triangle, the ascending triangle and the descending triangle. Between those three I favor ascending and descending triangles for couple of reasons. One of them is, both ascending and descending triangles have horizontal boundaries. Breakouts through the horizontal boundaries are the chart pattern signal. The other reason is that, both ascending and descending triangles have directional bias due to their upward and downward sloping lower and upper boundaries. I find symmetrical triangles difficult to trade as price usually finds resistance at the minor highs following the breakout. Pause around minor resistance usually hampers the momentum and can result in more frequent failures. A symmetrical triangle has both boundaries converging towards an apex. It is a neutral chart pattern and doesn’t have a directional bias.
 

Type 1 Breakout = Breakout without any Re-Test/Pullback.
Type 2 Breakout = Breakout with a Re-Test/Pullback.
Type 3 Breakout = Breakout followed by hard Re-Test of Pattern Boundary.
Type 4 Breakout = Failed Breakout  - Price fails to continue in the breakout's direction and instead reverses. 
 
 
 
 
 
Breakout Type 1, Type 2, and Type 3 Summary.
 
 
 Head & Shoulder Top Failure acting as Bullish Continuation.
 
Cup & Handle as a Continuation Pattern in an Uptrend.
 
Rectangle as a Continuation Pattern in an Uptrend.

Symmetrical Triangle as a Continuation Pattern in an Uptrend.
 
Several Bullish Chart Patterns in an Uptrend.

Rectangle Bullish Reversal.
 
Rectangle Bullish Continuation.
 
The latest stats on pattern reliability: Rectangle continues to lead. With good risk management Type 1 & Type 2 breakouts offered edge with pattern signals.
 
 
 
 From Peter Brandt's foreword to the 2021 Harriman House re-edition of 
Richard Schabacker's 'Technical Analysis and Stock Market Profits'.
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Tuesday, December 5, 2023

The Three Day Cycle & Parabolic Trade Setups | Stacey Burke

There are only three things price can do:
1. Breakout from a Range and Trend.
2. Breakout from a Range and Reverse.
3. Trading Range between Highs and Lows.
 
 1. Structure / Pattern
  •  Do we have any larger geometrical patterns?
  •  Head and Shoulders / Sell (Reverse Head and Shoulders / Buy)
  • Descending Triangle (Sell) Ascending Triangle (Buy)
  • Double Bottoms (Buy), Double Tops (Sell)
  • Rectangles (Continuation / Reversal)
  • Helps us identify geometric patterns for potential measured move profit targets for asymmetrical risk / reward.
I am mainly focused on horizontal ranges no matter what the geometrical pattern is. (The high and the low of the structure, typically this will be numbered “boxes” of 25-50-100 pips.) Numbers are horizontal. I DON’T TRADE DIAGONAL TREND LINE BREAKS.

2. High of the Day (HOD) / Low of the Day (LOD)
 
Where is the high, where is the low? There is a high and a low that the market is trading inside of. The market is either in a consolidation or a break out. The current HOD and LOD may be inside of a larger rectangle.

3. Timings
 
My focus is on the 3 hour window. 1 hour before the equity markets open, the hour of the equity markets open, and the hour after the equity markets open. Hence 12 - 15 minute candles.
  • ASIA 8-11 pm NY EST
  • EUR / LONDON 2-5 am NY EST
  • NEW YORK 8-11 am NY EST
This allows me to have laser-like focus for some simple recurring setups that occur frequently enough for selling, buying or trend trading setups. This repeatable cycle is recurring in all three 12 candle windows. Whether or not the range, the pattern and a good risk / reward trade setup is in each window is unpredictable.

4. Round Numbers
 
Typically these trades will come off of round numbers, specifically 00’s and 50’s. The quarter levels, 25 and 75 will often be a “stop hunt” extension of a 50 or 00 trading box.

5. Price Behaviour for Trade Setups
 
I look for engulfments and pin hammers. These can be “with trend” trades, or reversals, for stop hunts or in a trading range.I look to ENTER the majority of my trades “AT OR NEAR” number, i.e. 25, 50, 75, 00. Sometimes I may limit order these trades, others I may just get filled at market.

• “M” PATTERNS - TYPE 1,2,3
• “W” PATTERNS - TYPE 1,2,3

6. Risk Management / Profit Targets
 
My average STOP LOSS is 1 ATR. For most of the pairs it will be 20 pips. The GBPAUD, GBPNZD may be 25. Depending on the level of volatility on the day, on the pair, it may be a bit more or less give or take. Typically though, I am looking for a 1 bar stop. Position sizing can depend on the type of setup, and the size of stop loss.

The minimum PROFIT TARGET is usually 50 pips. Sometimes a market may hit a previous day’s high or low, or the current day’s high or low, OR SIGNIFICANT ROUND NUMBERS, 00, 50, and the market may stop there. I may only be up 40 pips. When those levels are prominent, it may be necessary to adjust that target on the day, based on HOW PRICE BEHAVES when it gets to those levels. Other trades (Measured Moves) may be in the area of 50-75 or a 100 or more pips. Again, depending on the setup and how that pair is trading on the day.

7. Trade Management / Self Management
 
Once I am in the trade, I will fight every urge that I have to interfere with it. I review the trade setup and thesis that I have for the trade. I monitor the behaviour initially based on my thesis. I will typically leave the screen, or watch, and monitor myself, self talk, do meditation, and possibly review the other pairs to identify any other setups.
 
I will normally NOT ADJUST my stop loss to BREAK EVEN UNTIL, the market has broken a high or low boundary, ( I wait for the 15 min candle to close) OR it has CLOSED 30 pips or more, breaking into the next quarterly range. At 40 pips, depending on if the market has moved (fast or creeping) I will potentially look to LOCK IN 40 pips if the market has “two-sided” trading occurring near my profit target. So, to clarify, if it has spent 30 minutes near my target without hitting it, I will be watching closely to “LOCK IN” profits, in case the market is preparing to reverse. When you are up 40 pips, YOU NEED TO GET PAID.
 
Quoted from:
 
 Dump & Pump Pattern.

 Pump & Dump Pattern.
 
Reference:
 
Stacey Burke - Three Day Trading Setups.
 
Aksel Kibar - Type 1 Breakout: Breakout NOT followed by Pullback.
 
Aksel Kibar - Type 2 Breakout: Breakout followed by Pullback.

Aksel Kibar - Type 3 Breakout: Breakout followed by hard Re-Test of Pattern Boundary.
And then there is the so called 'Failed Breakout' when price fails to continue
moving in the breakout's direction and instead reverses course.
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Thursday, March 9, 2023

Trading Inside or Outside the Daily and Weekly Range | Stacey Burke

When a market opens outside of the previous day's range and then auctions around the open, one's first impression is that there is no directional conviction present. In reality, the mere fact that the opening is beyond the previous day's range suggests that new other time frame activity has caused price to seek a higher or lower level. Given that the market has opened out of balance, there is a greater chance that directional conviction will develop than if the market had opened and auctioned within the range. An Open-Auction outside of range has the potential to be a big day, while an Open-Auction within value usually lacks conviction.
 
There are only three things price can do:
1. Breakout from a Range and Trend.
2. Breakout from a Range and Reverse.
3. Trading Range between Highs and Lows.

[...] In the large majority of cases, activity during any given day has direct and measurable implications on the following day. It is only on the relatively rare occasion when a market moves extremely out of balance that there is no correlation between two consecutive days. Understanding these implications enables a trader to more successfully visualize developing market activity.

The salient concept here is market balance. The relationship of the open to the previous day's value area and range gives valuable clues to the market's state of balance and what kind of risk/opportunity relationship to expect on a given trading day. In short, the greatest risk and opportunity arise when a market opens outside of the previous day's range. This indicates that the market is out of balance.

When a market opens out of balance, the potential for a dynamic move in either direction is high. Conversely, a market that opens and is accepted (auctions for at least one hour) within the previous day's value area embodies lower risk, but also less opportunity. The acceptance of price within the previous day's value area indicates balance, and therefore reduces the potential for a dynamic move.

Quoted from:
 
[The Value Area is a range where approximately 70% of the prior days volume traded. 
The range is derived from one standard deviation on either side of the mean which is roughly 70%.]
 
 
See also:
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