|
PureBytes Links
Trading Reference Links
|
I have listened to many comments on PS both here and on PatternSmasher's
private discussion group. I posted a message several weeks ago to the PS
group, but thought I'd also post to RT as a discussion of PatternSmasher
has recently surfaced. I am having a very positive experience with the
product...but I also understand where it may not meet the needs of many.
I purchased PatternSmasher when it was first made available in January
this year...and I would not sell it back to Kasanjian Research for
several times what I paid them for it!!! I admit that I am very biased
in my opinions as I favor pattern-based trading...and that is the real
strength of PS. Personally, I like systems that do not require
optimization....and pattern-based trading, in the spirit of Edwards and
Magee, allows me to trade with consistent results using patterns were
often considered too subjective to trade consistently. PatternSmasher
simply allows me to take subjectivity out of my pattern
assessment...thus ensuring consistency in mechanical trading.
I do not want to allude that pattern trading is the only trading
strategy that does not require optimization. I will also admit that
patterns can be designed that are optimized for specific issues and/or
time frames....so the dangers of optimization still apply. Still, I find
that certain patterns seem to have general validity across various
issues and time frames....and such patterns are "self optimizing" in a
sense. A big triangle is no different than a small triangle. The smaller
triangle may have developed as a result of a smaller time frame...and
may not have as much of a price move as the larger triangle....all
things being equal of course. Still, both triangles have the same
characteristics with regard to price moves that can be expected at the
completion of the triangle pattern. The market itself determines how a
triangle will develop...its size (in time and price range), lead-in
characteristics, etc. The resulting triangle reflects the environment
that caused its formation...and thus it is "self-optimized".
One can calculate the probability of a certain price move in a specific
direction on the completion of a specific predefined pattern. All
technical analysis is based on probability anyway...it's just that
pattern approaches look toward specific shapes versus indicators,
averages, etc.
For years, I was reluctant to base my trading too heavily on patterns as
I found them very difficult (but not impossible) to trade in a 100%
mechanical fashion, especially when I wanted to pre-qualify many issues
daily...and then pick the "best-of-the-best" to trade. I am the kind of
trader that needs a mechanical system as I have never possessed the
discipline to properly trade systems that require trader discretion. I
find a conflict of interest for myself when it comes to trading my own
money and leaving room for emotions to affect decisions that should be
objective and business-based. I take my hat off to traders that have won
this battle in the absence of a relatively mechanical trading system.
For me...I need the discipline...and mechanical systems give me that
discipline.
Because PS allows absolute and objective quantification of patterns, it
has opened up a whole new world for me to develop 100% completely
mechanical systems using pattern analysis as the core decision-making
engine. With PS, I found that I could do research into classic patterns
(i.e. - head and shoulders) and understand more about how well the
pattern works over a weekend than Edward's and Magee may have learned in
a lifetime! This is not an exaggeration! The power of the computer to
search for patterns through thousands of stocks/commodities over many
many years, and with perfect objectivity, is almost miraculous. I doubt
that Edward's and Magee ever dreamt that there would be such a day as
this!
I'm not trying to say that PatternSmasher is for everyone. It is not.
The current backtesting facilities in PS are graphical only (no data
file output or TradeStation-like reports as yet), so many will have a
problem based on this fact alone. In hindsight, however, I found that
the lack of historical statistics forced me to look at each and every
pattern carefully. Inadvertently, I learned about what worked and didn't
work in patterns...and was able to make certain adjustments and
refinements to some of the classic E & M patterns that have shown
results I consider to be very impressive.
There are a few things that some would consider to be "negatives" to PS.
The program does not force or recommend a specific entry or exit point,
but "automatic" trendline entries are provided on break of a trendline
drawn between pivots selected by the user. Again, all of this is
graphical at present. There is no facility for trailing stops. Although
I would advise cautious use of backtesting statistics if PS were to
offer this, the current program needs to develop in this area (and KR
has promised to work on this). The bottom line, however, is that those
purchasing PS either need to be serious about pattern-based trading
and/or research, OR, they need to have reasonable intelligence and a
willingness to learn about patterns in markets. One should not expect to
open the box, press a button, and money fall out the other side. PS is a
tool...with more emphasis as a research tool than trading system in the
current version. Still, it can be effectively used as a trading tool
with a bit of effort and reasonable entry/exit/money-management
principles. I have done this...so I will not listen to those that say it
cannot be done.
PS is the kind of program that will either turn you off, or, you'll find
it the greatest thing since sliced bread. I admit that not all trading
strategies are for everyone....even if they are very profitable. One
must believe in one's system, else one may be tempted to trade it
differently than how it was designed to be traded. For the same reasons
that trading based on fundamental analysis does not agree with me
personally...I must also allow others the same freedom to choose what
works for themselves. I'm convinced that two persons trading the same
identical pattern in PS will likely have different results. Because one
does not have good results should NOT invalidate the results of others
having better success. How many students did Gann teach?....And how many
have shared the same success as Gann?
To respond to a few questions on PS...
PS does, in fact, have features found on no other software.
Specifically, this is the ability to do serious research on a variety of
patterns for the first time in history. I'm not sure that one can
actually program ANY pattern that the "experts" have taken years to
study and learn, but I think a fair statement would be that over 90% of
such patterns can be programmed completely, with perfect objectivity,
and with reasonable study of the manual and special tutorial lessons
that come free with the program.
Is PS worth the price? It depends on whether pattern-based trading
agrees with you or not. I would not trade a system that was tested to
make 100% profit per week if it did not agree with me on the inside. I
would advise anyone that is willing to put in a reasonable effort and
who is not completely satisfied with their current system/strategy to
give PS a fair try...and return it if it does not work for you. I do not
think most will be disappointed, but for many, it will be the only way
to know for sure if such a tool fits both their style and profit
objectives.
As I mentioned, I am having very positive results with PS. Some might
argue that it is my entry/exit and money management strategy that is
responsible for this...and I'd probably agree that this is a big part of
it. Still, in my twenty plus years as a student and trader of the
markets, I've never been able to put together a system as profitable as
what I now have using PS at the core of the system.
Is PS a valid and viable approach? To this I'd have to say that it is
probably no more valid than Edwards and Magee and the trading masters of
this century that employed pattern-based approaches to trading. Rather
than ask, "Is PS profitable?", it would be better to ask, "Are
pattern-based trading approaches profitable?" Regardless of the response
to this question, there can be no doubt that PS is the first product in
history that is uniquely prepared to address such questions. As
"primitive" as some may consider the PS graphics-based backtesting
facility...there still is nothing publicly available that can provide as
rich and deep an understanding into the behavior of an innumerable
variety of patterns as PS. In this regard, PS is in a class by
itself...and there is no fair comparison possible with any other
software. Yeah, I suppose it's possible to program TradeStation to
recognize a plethora of patterns, but to make it do what PS does would
require TS code with the complexity of UNIX, WindowsNT, and Oracle
databases combined!!! (or a PatternSmasher TS module!). Put simply,
PatternSmasher's pattern-recognition capabilities are not possible in
any software available today. One must develop software, from the start,
with a foundation that understands the basic elements of patterns at its
very core. Such is the paradigm shift in technical analysis software as
represented by PatternSmasher.
All PS does is objectively find patterns...and can scan hundreds of
stocks/commodities daily without having to manually search each chart.
This feature alone can benefit the most seasoned pattern trader as one
can scan for the "best-of-the-best" patterns amongst a thousand...and
then cherry-pick amongst them for the best trading candidates. Some will
find PS to be the key to consistent profits. Others will, no doubt,
discover that they cannot put together a whole system focused on PS, but
will find it useful as a filter in other trading strategies. And of
course there will always be those that cannot make a profit with PS to
save their life...even using the same patterns as others that are having
success. The differing success may be due to discipline, money
management, or even one having an account that could not withstand a
certain drawdown while the other trader's account was well-funded.
I am not paid by KR, nor have I received or been promised any special
benefits to share a "glowing" review of PS with this group. I have never
met Ed Kasanjian or any of the KR staff. I'm only sharing this in the
spirit of the rich sharing I've received on this discussion group and
elsewhere over the years. There are many software programs I wish I had
read about BEFORE I mailed a check!!! I'm hopeful that this will
encourage others to openly share their experiences with software
programs - good or bad.
In summary, I simply want others to know that this user is having a very
very positive experience with PatternSmasher...but I quickly acknowledge
that the program may not be for everyone.
Andre
|