7 Perfect Pattern Trades in One Afternoon – 19.75 SP Points
This chart developed on 9/06/13 in the afternoon starting just after 2:00 PM EST. The maximum favorable excursion was 19.75 points for 7 different pattern trades!!! The total adverse excursion was just 4 ticks, with no losing trades.
What is a Perfect Pattern Trade?
A perfect pattern trade is when the market is performing logically and forming tradable patterns. The first hour of patterns involves 4 short trades shown below.
The short trades start with an exhaustion pattern that marks a top as it is intended to do. You will also note TICK divergence. The previous high TICK was 782 and the divergent high was only 470, with price trading 4 ticks higher. The exhaustion trade has no adverse excursion and is good for 2.75 points.
The next trade is both a Reversal and Exhaust Trend pattern. We have a lower low TICK of -471 and a lower high of just 446. In addition the was a Euro Divergence signal. That trade was good for 2.25 points.
The next trade is a trend trade, with a lower tick low of -477 and a lower tick high of 374. Again we see Euro Divergence also and a trade good for 2.25 points.
The next trade is also a trend trade, with a lower tick low of -719 and a lower tick high of 336. Again we see Euro Divergence also and a trade good for 4.25 points.
There is something very important to note with ALL of the trades. That is the importance of having a trading plan and using the statistics. The important chart is shown below.
This chart is telling me that when I have an (eSignal) countertrend trade (which occurs when the market trades a blue countertrend zone) there is a 50.1% there will not be adverse excursion. So what does that mean here? It means that if you set a target at or below the blue countertrend zone there is only a 50% chance that you get filled. The other 50% of the time the market retraces and you lose at least 6 ticks that you just earned. Only 1 of the 7 trades exceeded the blue zone. It is easy to get into a pattern trade, but do you use the power of the pattern to exit?
What follows is a bottoming pattern and ZoneTraderPro again calls a bottom with an Exhaustion Trade.
First we start with an Exhaustion pattern trade that is again has a higher low TICK divergence of -842. This trade is good for 2.5 points.
The next trade is an Exhaust Trend pattern trade that has a higher tick high of 328 and a higher TICK low of -500, which is exactly what you like to see. This trade is good for 2.25 points. Notice that after you would exit the trade that a trend trade pattern does not form at support, because the tick filter (the little red dot) keeps you out of the trade and is a signal the market is going lower.
The market going lower sets up the last reversal/trend pattern trade worth 3.75 points. We have a lower tick low of -806 and a lower TICK high of 303.