Last year, I shared more than 1300 free signals and forecasts for Gold, Forex, Commodities and Indexes.
In my predictions, quite often I relied on classic price action patterns.
In this article, I will reveal the win rate of each pattern, the most accurate and the least accurate formations of the last year.
Please, note that all the predictions and forecasts that I shared this year are available on TradingView and you can back test any of the setup that I identified this year by your own. Just choose a relevant tag on my TradingView page.
Also, some forecasts & signals were based on a combination of multiple patterns.
Here is the list of the patterns that I personally trade:
🔘 Double Top or Bottom with Equal Highs
The pattern is considered to be valid when the highs or lows of the pattern are equal. The pattern gives a bearish/bullish signal when its neckline is broken.
🔘 Double Top or Bottom with Lower High/Higher Low or Cup & Handle
The pattern is considered to be valid when the second top/bottom of the patterns is lower/higher than the first one. The pattern gives a bearish/bullish signal when its neckline is broken.
🔘 Head & Shoulders and Inverted Head and Shoulders
The pattern gives a bearish/bullish signal when its neckline is broken.
🔘 Horizontal Range
The pattern is the extension of a classic double top/bottom with at least 3 equal highs/lows. The pattern gives a bearish/bullish signal when its neckline is broken.
🔘 Bullish/Bearish Flag
The pattern represents a rising/falling parallel channel. It gives a bullish/bearish signal when its upper/lower boundary is broken.
🔘 Rising/Falling Wedge Pattern
The pattern represents a contracting rising/falling channel. It gives a bullish/bearish signal when its upper/lower boundary is broken.
🔘 Rising/Falling Expanding Wedge
The pattern represents an expanding rising/falling channel. It gives a bullish/bearish signal when its upper/lower boundary is broken.
🔘 Descending/Ascending Triangle
The pattern is the extension of a cup & handle pattern with at least 2 lower highs/lows. The pattern gives a bearish/bullish signal when its neckline is broken.
Please, also note that all the patterns that I identified and traded were formed on key horizontal or vertical structures. Remember that the accuracy of any pattern drops dramatically if it is formed beyond key levels.
I consider the pattern to be a winning one if after a neckline breakout, it managed to reach the closest horizontal or vertical structure, not invalidating the pattern's highs/lows.
For example, if the price violated the high of the cup and handle pattern after its neckline breakout, such a pattern is losing one.
If it reached the closest structure without violation of the high, it is a winning pattern.
🔍 Double Top or Bottom with Equal Highs
I spotted 85 setups featuring these patterns. Their accuracy is 62%.
🥉 Double Top or Bottom with Lower High/Higher Low or Cup & Handle
96 setups were spotted. The performance turned out to be a little bit higher than a classic double top/bottom with 65% of the setups hitting the target. 🔍 Head & Shoulders and Inverted Head and Shoulders
58 formations spotted this year. Average win rate is 64% 🏆 Horizontal Range
The most accurate pattern of this year. More than 148 patterns were spotted and 74% among them gave accurate signal.
🔍 Bullish/Bearish Flag
38 setups identified this year. The accuracy of the pattern is 57%
Rising/Falling Wedge
The pattern turned out to be a little bit more accurate. Among 62 formations, 59% end up being profitable.
👎 Rising/Falling Expanding Wedge
The worst pattern of this year. I recognized 24 patterns and their accuracy was just 51%.
🥈 Descending/Ascending Triangle
64 patterns were identified. The win rate of the pattern is 66%.
The most important conclusion that we can make analyzing the performance of these patterns is that they all have an accuracy above 50%. If you properly combine these patterns with some other technical or fundamental tools, the accuracy of the setup will increase dramatically.
Great stuff, thanks for sharing! Can you tell us where and how you hunt for these patterns? I like to use FinViz and screen for patterns, do you have other suggestions? Thanks!
VasilyTrader
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What is your favorite pattern?
DoogTtam
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I'm newer so I still have a lot to learn. I was under the impression that your horizontal ranges were in fact "true" bull/bear flags and that your bull/bear flags are called "in spirit" bull/bear flags. Basically, the likelihood of a breakout favoring the existing trend is actually higher with a 90 degree horizontal range vs. a 45+ degree range. I know Gareth Soloway has touched on this a number of times. Again, I'm just trying to learn! Maybe he's full of you know what!
VasilyTrader
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@DoogTtam, that’s the subjectivity of trading. Some trades see a cup and handle, some will call that ascending triangle, some will call it a rising wedge.
It all depends on your rules
melikatrader94
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you gather a lot of good information here! my resource for using and analysis these patterns is always the "Encyclopedia of Chart Patterns" book.
Trendoscope
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Thanks for very insightful post. However, I have one concern. Correct me if I am wrong. The pattern you mentioned as expanding wedge is actually expanding triangle.
How I differentiate a wedge from triangle is that in wedge both trend lines will move in the same direction whereas in triangle, it will move in different directions.
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