The Best Chart Patterns To Trade (Reliability Study)
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- เผยแพร่เมื่อ 23 ต.ค. 2022
- There are numerous chart patterns that form with considerable consistency in the markets, and traders often see them as the holy grail of stock trading.
The truth is is that chart patterns are only a small part of a profitable trading strategy, from cup and handle patterns to head and shoulder patterns, there are many to choose from but they become far more profitable with other factors added.
In this video we look at chart pattern success rates and some other areas to consider to get the best out of each.
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Pennant 5:50
Flag 6:15
A/D Triangle 6:50
A/D Channel 7:15
Double Top/Bottom 7:40
Triple Top/Bottom 8:25
Rectangle 8:52
Head & Shoulders (/Inverted) 10:02
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The main takeaway for me here is pay attention to consolidation zones. These are liquidity zones like trenches where short timeframe traders are ready to load up and move with momentum whichever way price breaks. This is where the best risk reward is found, regardless of timeframe. It's when short term traders are in control because that drives momentum, and as momentum gets accepted, long term comes in and forms the consolidation levels and we start all over again.
Don't get too technical with pictures and terminologies because these "stills" are never real in an open market. Your drawing keeps changing and most patterns in this video become each other, the moment you look it's changing like a bull flag will turn into a channel, a double top may become and ascending triangle or breakdown, it's just too noisy. Instead focus on contraction and expansion of volatility to determine momentum and confirm with longer timeframes to get ideas.
Can we chat ,to get better understanding
I second your comment! The failure of one pattern is the completion of another pattern. I struggled a lot with the "cart before the horse" issue with many kinds of technical analysis and retail trading conventional wisdom, until I got past all the labels to the core behavior of volatility expansion/contraction, and how these cycles tend to occur in certain times and places.
Agreec100%. Focus on consolidation, wait for the prices to contact (tighten for a few days within 1% of close), then breaks out of the range.
while i think your points are valuable , often you will see these patterns play out exactly by the book
The rankings are
trend reversal patterns below
- 1st HEAD & SHOULDER (93%)
- 2nd REACTANGLE (78%)
- 3rd TRIPLE TOP (77%)
- 4th DOUBLE TOP (75%)
trend continuation patterns below
- 5th ASCENDING CHANNEL (73%)
- 6th ASCENDING TRIANGLE (72%)
- 7th FLAT FLAG (67%)
- 8th PENNANT (55%)
The RECTANGLE breakout strategy is better known as the DARVAS BOX THEORY..
Nicolas DARVAS made 2M From it (probably 10M in today's money).
At least percentages confirm what to focus on...draw box & watch for breakout!
An excellent video, very clear and easy to understand. I knew about these patterns, but having the statistics helps me understand the relative reliability of each one and how much to trust them - some little more than 50% reliable.
Glad it was helpful!
My first real intro to this field , thank you for good content.
Thanks for watching
Awesome & well researched video..& the presentation.. Of course.. Great going..& keep growing..👍
So nice of you
1st Should be Cup & Handle pattern probability is very high
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What a great video, recently have been mixing up these patterns because visually they look really similar but as you point out the small difference give a big success rate between all of them.
Glad it was helpful!
An excellent video, very clear and easy to understand
Glad you think so!
This video makes it look so simple to trade in patterns. But in reality it's not that easy.
Very true.
Yeah and aside of patterns need a lot of things to consider and proper physiology to do things when it's should be done and when it's not should be done.
Impatience and ignoring your risk management are the only things that makes it uneasy.
Love your vids !!! Very clear info . Thank you
Thanks 👍
Using these “behavioral price patterns” at predefined key levels, along with a 9,10 or 11 ema (they are all close), in conjunction with a 200ema crossover for timing, is fairly effective.
Excellent presentation..
Just want to tell you thank you for this!
Great Video, thank you for this.😀
My pleasure!
So much value thank you brother!
Do you think Double top, triple top and rectangle are very closely related and can give pretty much the same results? it depends on how you look at them they can be considered the same structure.
They are all closely related. For me the lateral patterns work better due to less resistance after a break.
Thank you!
Fantastic explanation, best pattern I have come across so far
Great to hear!
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thanks. very helpful
Glad it helped!
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Wow, thank you! 🙏
Wow thank you so much
You’re welcome 😊
You really make the best videos
Thanks 🙏
Excellent thanks
You are welcome
Man, you always make such informative videos.
I appreciate that!
You're welcome
I love this video. Especially chart patterns
Thanks dali
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Thanks Amit
Your candlestick charts are wicked!
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Thanks Daniel
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Wow amazing video!
Glad you think so!
Been looking for these stats for long....do you also have videos about combination of technical indicators e.g. RSI , 50EMA and Fibbonacci
I love that fact that just before you go through the pattern predictability you lay out and beautifully summarize the elements of your strategy in one slide succinctly - after having watched all your videos and summarized them for myself I am now able to integrate new info into my own strategy - each video while being a review of the details you have taught, still always seems to add new value - BRAVO! Thank you for your paid service and your video library
Thank you Mike - Always appreciated....
yeah i noticed that head shoulder is the pattern that trap the traders by continue green and red candles , thats why the sucess rate is so high.
Hi, is there free stock analyze software or screener that automatically analyzing and identifying my stock pattern ?txx
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Superb. Subscribed. Surprised to see inverted head and shoulder to be the most successful. What about All time high breakout( can it be called a pattern) or Any idea What is the success rate for ATH breakout?
my fav is falling wedge after a prolonged downtrend, on stocks with strong fundamentals and low valuation. there's almost always a bullish engulfing or 3 white soldiers on this setup
informative, i like it
Glad you liked it!
This seems to me that the tests were done in hindsight. For example, how can the triple top be successful 77% of the time and the bullish rectangle be successful 78% of the time? Doesn't the success of the bullish rectangle mean a failure of the triple top? This gives the impression that the percentage is of whether or not the breakout was successful, when really it shows the success rate of the movement of the price AFTER it has already broken out.
Which timeframes were these relability studies conducted on? If I were to guess I'd say it didn't involve any of the shorter intraday timeframes but most likely daily, weekly or even monthly.
I don't see the difference between No. 7 Flag and No. 5 the Channels. Best viewed at 10:31. Is it length of time the pattern forms for?
Hello, please does the breakout scanner work for forex pairs too or just for stocks?
Does it send allerts?
thanks
What will be the recommended Timeframe for applying these chart patterns for intraday trading?
Thanks!
Thank you so much - Sorry for the late reply! 🙏
Soo soo much informative ...top notch work mate🤟💯
Glad you think so!
Also about higher timeframe supply and demand zones statistics ...please provide those or give a link if you have already covered that
Suggestion:
I've listened to almost every video you've released and most are incredibly useful as short snippets to learn and broaden from.
However, for videos like these, given they have real relevant data to use, you ought to start incorporating the timestamp system that TH-cam provides.
It would make using your videos for reference much easier and smooth.
Thanks Mastero. Im not familiar with the timestamp?
Thanks for the analysis, I have two questions:
Do these % success figures for each pattern cover every case, irrespective of the other considerations such as volume and candlestick indication?
I often see H&S patterns forming frequently during uptrends and downtrends, and they can easily be part of that trend. They might not be particularly noticeable, with just one price blip forming the left or right shoulder, but they do meet the technical criteria of H&S. I assume these are included in the % success rates?
Yes, concur. Don't know what the Samurai Academy study's criteria were, so I can't speak to that, only from my own experience. During a trend consolidation, some pullbacks or consolidations can show a kind of hidden H&S within a flag, pennant, etc whatever pattern before breaking out for continuation.
Another great video :) How long have you been trading for in the market?
30 years
@@FinancialWisdom Awesome :)
If one combines the chart pattern with financial and business analysis of the stock then the success rate can be increased further by 5-10%.
Hi, how to find or search for bullish rectangle pattern in finviz screener?txx
Let's not forget formations that consist of several patterns, such as the cup & handle formation. It would be interesting to see if they provide increased probability due to their inherent combination of patterns. What do you think/assume? // Keep up the good work.👍
some videos deserve an applaud button
Thanks
Please define differences between Bull Flag and Ascending channel; they appear identical visually, and by description. Thanks!
I came here to learn how to trade after listening to a guy on radio talk about the importance of investing and how he made $460,000 in 4 months from $100k. Somehow this video has helped shed light on some things, but I'm confused, I'm a newbie and I'm open to ideas.
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Bullowski has this different. Bump and run, cup and handle etc. High volume, 8% move, trend line break, and RSI e.g. higher on second leg of double bottom
Get it. Head and shoulders, nice.
Your software/scanner, has picked a number of great breakout stocks. I was very impressed ADX of each of the stocks!
Great to hear!
So how is the flag different to a channel? Bull flag looks like ascending channel. Uptrend, short consolidation downwardsn going up again. Both are the same at least as shown in the video
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Strange that Cup and Handle pattern didn't make it to the top 8. O Neil wrote the whole book around Cup and Handle pattern.
Great video - Prior to this I was not a big chart patterns fan. That said you cannot argue with the percentage success rates. I think this is what is missing in most of these types of videos, that is not a good argument as to why you should use patterns in the first pace and why one may be better than the other.
Thanks for sharing!
ummm what markets were tested? What underlyings? How did you quantify the patterns?
What data are you testing this against?
Because you can get a lot of false positives and false negatives depending on what asset class you are looking at to perform this study.
My holy grail of information 👌👍🙏
Glad to hear that
I'm just curious... can someone explain the difference between a Bullish Rectangle and a Triple Top? They appear to be opposite of each other... and they both have >70% success rate? How can that be?
A great read is Technical Analysis of Stock Trends by John Magee. Great book👍
Thanks I'll take a look
It sounds like it’s easy to imply the success rate is actually much higher. Your testing success by if the move up or down was the same as the build up to the pattern.
To me it means even breaking out a little bit happens more than the listed rates, making these patterns usually over 75%_80% accurate?
Clarity of the presentation is awesome.
Thanks a lot 😊
Have you compared this with Bulkowski's studies?
What about CnH and HTF?
What's the difference between ascending/descending flag and channels? they are exactly same thing
what's the differecne between a bull flag and an ascending channel?
Not understanding the distinction between bull flag and ascending channel....
What is missing is the technical definition of each trading pattern
For that matter, the bull flag and ascending channel look the same, therefore the definition, which was done by the research itself - is very lacking
I would appreciate a reference to a source or further explanation
Very nice channel - I purchased the PDF
Thanks Moshe - The study was limited unfortunately, I would have liked to disclose more information as you allude but its just not there...
Not sure why Samurai has the Ascending and Descending channel patterns labeled backwards.
Well spotted
Amazing video as usual.
Always good content
I'm a doctor and we always refer to such published data and we read lot of articles and we practice evidence based medicine.
Can you tell me some names of journals or publishers where such articles and research published are related to the stock market.
You can make a video on that
Hi Tushar - No real reference point, I just scour the internet to see what I can find.....
Before watching video I click on like button. Your videos changed my trading psychology.
Thanks Rawat
I have a question : do these pattern have volume signal ?
It was not suggested. I assume that because these were all breakout that volume would have been present but to what degree it was not disclosed sorry
The head & shoulders description is inaccurate. It's formed when the first shoulder, head, and neckline are formed. The entry is near the first shoulder, stop near the head, and first take profit near the neckline. Most people misplay it, looking for the support break not realizing the R:R is already skewed against them.
Thanks Steven
are all these patterns assessed on the same timeframe and what timeframe is it ? Thanks for posting the video.
We can only assume it was the daily I'm afraid, they did not disclose. The principle would largely be the same
I would say tight flags best before watching 🤑
Can you clarify what time frame this data is being referenced ? 1-D, 1-W, intraday etc. Thanks, love your content!
Doesn't matter the time frame, these patterns appear in all time frames but higher the time frame more reliable the pattern.
I use 4H, D, W patterns
Oddly it does not say, but I personally use the weekly charts. If I had to guess they probably looked at the daily...
@@FinancialWisdom All the top traders i follow, they use the daily to analyse the chart, they do look at the weekly but just for confirmation.
@@eduardtarniceriu102 which Traders do you follow?
Please also post a video on the success rate of different Candle types such as Doji Candle, Three Black Crows, etc...Thank you :)
Check out my candlestick video from T bilkowski
@@FinancialWisdom thanks, found it!
Sometimes it is not easy for me to spot patterns in a graph. So, a question for all the traders out there, "What is the best practice for spotting chart patterns more easily?" Is it just more screen time, or do you have specific things you do? Anything will help, thanks in advance!
Do you use a bar chart or a line chart? I find it much easier to use a line chart and then go through different timeframes (30min, d, w)
@@tom-eliasknosp5267 Thanks for the advice, I mostly use bar charts to analyse candlesticks, they are major part of my trade analysis. But using line charts actually seem really helpful concerning patterns! I can see patterns more clearly now, cheers!
Screen time/analysis/experience and slowly it will all come together, no need to rush it though, enjoy the process.....
@@FinancialWisdom thanks man! Keep up the good work
What is the difference between 2 and 3. You see the difference in hindsight
V bottom/Tops
Do you have statistics to back this up?
Unfortunately not - They only share the details I have provided.
@@FinancialWisdom ok thanks buddy
Bearish rectangles are Darvas Boxes.
They are - Boxes are the best IMO
I love Head and Shoulder Patterns - in the last months Tesla (short) was a great example for their efficiency....
What about candle stick pattern only video ???
On the channel already - bulkowski
I hope you do a video like this one but for candlesticks patterns
Love your content by the way ❤️❤️❤️❤️
Have you seen my video on candlesticks with Thomas Bulkowski?
@@FinancialWisdom no but I'll watch it now
Thanks a lot ❤️❤️❤️❤️❤️❤️
can you just provide the breakout signals instead of the scanner?
Not sure what you mean?
I knew it was HNS... Next is falling and rising wedges
How about cup and handle?
I did not make the best in their study, unless of course they did not look for it. Either way they did not mention
It's rare and takes ages to form, but then.....
Update: Actually in the 2013 book "Swing and Day Trading: Bulkowski, Thomas" he mentions that the Cup n Handle ain't that successful and he does not use it. So take note of that. (REALLY good book btw! Best Swing book I read so far)
another way to look at it - the Head and the Right shoulder (without the left one) could be looking like a cup with handle right?
Not sure but I think ascending /descending channel looks wrong as too similar to bullish/ bearish flag. Please confirm.
I have some "problems" with these patterns: to achive the succes rates you have to trade each of them for hundred times in hundred different stocks. If you start trading now and only use the Top 5 patterns, you can easily run into a 20 times losing streak with each of them. Does every pattern works the same way in a bear and bull market? What about stop loss and take profit and how to determine them? Minimum and maximun time in a trade for different patterns? Just some questions im asking myself =)
Spot on. I agree so many other variables to consider. I can only obviously share the findings of their study.
A lot of it depend on pure luck. Technical analysis can do good to us with a lot of luck and very strict rules. For example, 100 stocks may be forming IH&S pattern today but we may pick only 10 of them. what if those 10 are from the 20% that is mentioned in this study as losing trades. So even if we have 80% success rate, a lot depend on our selection. hence I would always look at relative strength, market trend and the industry group in the screening process.
The bear/bearish flag and ascending/descending channel pattern looks the same to me. Can anyone explain the difference?
flag is usually small and shorter while channel is bigger/longer
I think it's supposed to be viewed along with RSI which helps with the direction
what about the cup and handle? :(
Not the first to ask. They either never looked for that pattern or it never made the top 7 charts...
Till last i thought at first may be cup and handle