Pattern Trading and a Typical Day

What is a “Typical” Pattern Trading Day?

On Wednesday I had a trader send me an email and ask me questions about ZoneTraderPro.  In response to his email I sent him back a couple of pictures from Wednesday afternoon which illustrates pattern trading that ZoneTraderPro identifies.

Typical trading day 10/09/13
Typical trading day 10/09/13

In the first picture from Wednesday afternoon there were 10 trades of which at least eight made a minimum of a point half.  The remaining two trades did not stop out for losses.  The trader wrote back and asked if this was a typical day.  My response was that it was neither typical or atypical.  The purpose of ZoneTraderPro is to identify constantly repeating patterns based on statistical analysis and plot pattern trades on the chart.  In addition to plotting pattern trading ZoneTraderPro then predicts where the market should trade at in advance of the market trading there.  We see some excellent trades on this afternoon. First we have a nice reversal followed by an exhaustion topping pattern with excellent tick divergence at the trading zone.  We then see another exhaustion trade marking the bottom which has a significantly higher low tick .  Starting at about 245 p.m. we see a series of three trades with the exhaustion trend trade and the reversal trading pattern excellent examples of a perfect trade.

In the second chart we see two excellent exhaustion trades.  The first exhaustion trade is good for almost 10 points and it marks of a bottom at one p.m. At the location of the trade we again see a significantly higher tick low and it is immediately followed by a red tick filter dot to the upside.  The trade is then immediately followed by a four point exhaustion short trade and then exhaustion trend trade.  Prior to the exhaustion trades we see the purpose and the strength of the tick filter.  Right as the market was trading at the price trigger the tick filter indicated that we should not be in this trade, first warning us about a trend short trade and then warning us about a reversal long trade.  In each instance the warning not to take the trade was correct.

So to answer the traders question about whether this is a typical day, it is typical in that ZoneTraderPro is identifying the patterns in a typical day. What is atypical is simply the number of patterns which produced excellent results in a three hour period. It also illustrated the need for a trading plan to avoid needless losses.

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