Odds on Pattern

There are no indicators or patterns that pay off every time. The best we can do as traders is to calculate probability of a trade working in our favor. Markets are like snowflakes. No day is like another.

Legally every analyst must have a disclaimer. The reason for this is protection. The truth is no one can predict future events, but we can get odds in our favor.

Probability is our source and we need benchmarks to realize opportunity. Professional traders have input from economists, research departments and technicians. We need to decipher price action for clues on what they know. After all they are the ones that move markets.

All traders want to catch a trend at the onset. So, how do we recognize when odds favor a breakout? Most systems use vertical measurements…open, high, low and close. If the vertical range (high minus low) is far above the norm, odds favor a period of consolidation. And if the range is far below average, probability favors a breakout. This information is available in every charting package.

The dimension of time at price is useful to increase the odds of timing a breakout or onset of a trend.

The chart below illustrates the horizontal dimension or time at price (TAP). When TAP exceeds the norm, a breakout or vertical move is normally not far behind.

John Seguin, Market Taker Mentoring

Trader Education