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To be sure one must be careful when using
patterns. However, as noted in Bulkowski's "Encyclopedia of Chart
Patterns" there are patterns that are quite reliable. Interestingly, they
are not the "exotic" ones (e.g., cup with handle), but rather the old
standard chart formations (e.g., falling wedges, etc.).
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----- Original Message -----
<DIV
style="BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: black">From:
Ira Tunik
To: <A title=realtraders@xxxxxxxxxxx
href="mailto:realtraders@xxxxxxxxxxx";>realtraders
Sent: Wednesday, November 15, 2000 5:56
PM
Subject: [RT] patterns and systems
I have read a lot about patterns lately in this
group. The cup andhandle has come up a great deal of
late. The bad thing about thesepatterns, whether it be cup and
handle, head and shoulders, pennants,flags or any of the other myriad of
formations is that they don't workconsistently enough to base a trade
upon. You are always guessing andunder many market conditions these
guesses are incorrect.There are other systems using cross overs as in
stochastics, William's%R, MACD, and moving averages. I have not
found them to be more the 30%accurate. This is not a good percentage
for a trader. For an investor,who has a great deal of time to let
the profits on the good trades runand is scrupulous about his stops, this
can be a profitable percentage.I met a fund manager who was making a 30%
annualized return with a 38%win percentage.There is
seasonality. Look at the Moore Report and analyze
theirresults. For taking trades based upon past history their record
is farfrom exemplary. There are classic methods such as Gann, Eliot,
andmethods put forth by Hurst, and Steidlmayer. There are books
on "Howto Chart Your Way to Stock Market Profits" and "Winning
Market Systems,83 Ways to Beat the Market" as well as numerous books on
Candlesticks,astrology, delta timing points and point and figure
charts.With all of these systems, indicators and books, there are
still veryfew really successful traders. It is the trader that
executes the planor system that makes it profitable. Whatever system
you use, whatevergroup of indicators or fundamentals you apply, it
is still up to you,the trader, to form a plan of action and execute that
plan. The cup andhandle may have failed, but from what I read, the
trader didn't. Heexecuted his plan and extricated himself from the
trade. He may lookback at the trade, analyze what he did and ask
himself, " What could Ihave added to the system to avoid this type of
mistake?". There aredozens of questions you ask yourself after every
trade, successful orunsuccessful. It is these questions that
strengthen your trading methodand help you avoid making the same mistake
twice. It all comes down to"Make a plan and then follow that
plan". Always have the predeterminedrisk. Good trading
and a good week. Ira.To
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