I came by a chart pattern recognition software lately.I tried it & although it is not as reliable as the human mind, it might help find potential.
Hi there, and welcome to this short video having a look at the Pattern Recognition Scanner in a bit more detail. I've actually spoken to a number of clients recently who said that they find this tool quite interesting. But they want to get a bit of an idea from the Product Development department about how they can get the most from it, and maximise their time on it.
So first of all, I've opened up the Pattern Recognition Scanner right here in the subscription area. I should point out that a few clients have actually thought that this means that there is a charge for pattern recognition. I just want to let you know that there's not. It's completely complementary to our clients. There's no cost at all.
It just means that you're subscribing to different pattern types. Now one of the first things that you have to do is give your subscription title a name, let's call mine CMC 1. And there's actually nine different pattern types that you can go ahead and select. As you can see there, I've only selected the top three, so I've got wedge, channel, and triangle. You've got head and shoulders, double top, triple bottom, all the rest of them. Personally, I don't bother with these, because you already get quite a lot of patterns that come out at the end, and I find that the wedge, channel, and triangle tend to be the best. Then you've got product type.
So you can choose all the asset classes that we've got. You can select all. To be honest, guys, I tend to prefer currencies, indices, and commodities. That's just what I prefer to look at. But if you're a share trader or you're into treasuries, feel free to select those, no problem at all.
Then you've got your time interval. Time interval is basically your interval that the charts will look at.
So you're looking at 15 minutes, one hour, four hours or one day. That's just the interval of your chart.
So if you've got a triangle formation and it's 15 minutes, each bar that you see within the pattern will be a 15-minute interval, and the same for one hour, four hours, and then one day. Then you've got pattern type. In pattern type you've got emerging, which is like when you've got a triangle formation but the price action hasn't quite broken through it yet. So that's a trade setup that's not quite yet come to fruition. And then you've got completed patterns, where you've actually had a technical breakout. It's already broken through the potential support or the potential resistance.
And then you click update and you're good to go. I'm just going to go to my emerging and completed section right here, and I'll have a look at some of these in more detail right now. So emerging patterns, as I mentioned, are technical trade setups that have yet to break out, so if we have a look at the Euro 50 cash and then click on chart, that's actually going to open up a chart with support and resistance levels already drawn on there. Let's have a little look at that in detail. So as you see there, it's a little triangle formation right there. If it breaks out through the potential resistance right here, or breaks down through the potential support, that would be a breakout and it would move from emerging and become a completed pattern.
Why people like this section is it can be quite handy if you're wanting an early warning signal that a specific technical pattern is going to break out. In fact, if you click this button right here, that will set an alert so that when it does break through that potential support or resistance, you'll be alerted to it on your web-based trading platform. But as I said before, I personally prefer the completed pattern section because these are technical trade setups that I can be involved in right away. So if you have a look at silver for example, I'm going to go ahead and open up a chart right there, and then I'll run through what all the different columns mean on here. So, as you can see there, the difference in essence is that you've got your resistance, you've got your support, then you've got a price projection box. So let's have a look at silver in more detail. So when you see right here, you've got the product name here, you've got the time it came out, you've got whether it's bullish or bearish, and the interval.
And, say this is a 15-minute chart, it's got 15 bars as its length. The star rating system matches up to, the RSI, the Stochastic, the DMI negative and DMI plus, and the ADX.
Basically, all the most popular technical indicators. Now if they all match up to the direction of the breakout, for example in this instance here, if they're all giving buy signals and you've got a bullish trend, then you'll get more stars. You can get one star, which means that they will either be neutral or pointing in the opposite direction.
But to be honest, just because it's got more stars doesn't necessarily mean it's going to be a fair justification for future performance. It just gives you an idea that there's a little bit more evidence to suggest that a lot more technical factors are pointing in the same direction. So you might get a one- or two-star pattern, but it still will be worth having a look at, because this means that a lot of the other technical indicators might just be neutral. Then you've got the breakout price, you've got the real-time point change from the breakout. So where there's green, it's already gone in the right direction, and when it's red, it's actually going in the opposite direction. I tend to like this to be as close to zero as possible to show that there's still a little bit more mileage.
And then you've got this button right here. This button is really important because it allows you to see a statistical analysis of up to the last 100 instances of this pattern. So, on here right now for silver, I could go ahead and attach an order ticket to there, so I'm just going to go ahead and do that right now. And this might be something that I might want to take advantage of, so I'm just going to go ahead and hit one, set my take profit to here, and my stop loss there.
As a matter of fact, let's just change that to ten and hit return. So in this particular instance, I could be risking 26 to make 192, but I don't want to just do that. Obviously, you want to do your other analyses as well. I also want to see how successful this pattern has been in the past. So I'm just going to left-click on here and it's going to load up all the other instances that this pattern has been active. What you can actually see here is that in the last 100 instances that there's been silver, the triangle, and the 15-minute interval, 24% of the time it fails, 25% of the time it hits the low part of the price projection box, 13% medium, but 38% high.
So technically I like to look for when there's a big ratio between failed and high. In this particular instance it's okay, but if that was about 15% and that was a little bit higher, that would be a stronger ratio to look at. But in this particular instance, if I had done my other research, and I had a good story and a trading plan.
Because I would never trade purely on the back of pattern recognition. It just gives you a bit of an idea of what to expect. It can be quite useful for trying to do your risk/reward ratios as well. You can see there, we could be targeting the top end of the price projection box with my stop losses slightly below the breakout level in the census.
Actually, now that I've moved that, that's £66 potential risk versus £190 potential gain, and then I'd just go ahead and click confirm and that trade would be placed and that would be it, done. It's also possible for you to go ahead and back test any of these products and pattern types. Just select the asset type you want here, for example I can just go ahead and select gold, and then it would go ahead and look at the exact same details for triangle, 15 minutes. I can change that to one day, for example, and it would look at the last instances like that. Very, very useful. But typically, I look at this.
New trading opportunities come up every 15 minutes, but I can go ahead and change the interval here to say that I only want to see four-hour patterns, for example, and it would only go ahead and show me the four-hour patterns that are in play right now. I can go back to one day. It just gives you a bit of an idea of what to expect. We can have a look at the US Nasdaq right here.
I can already see it's already gone quite, quite far into profit right now. Well actually, it's still got a good bit still to go right there, so it's eyeing up higher gains right there.
I just leave that running in the background, and whenever new opportunities come in I check them out. If it fits into other parts of my analysis, it can be a very, very useful tool. It's something that many CMC (Markets) clients have already been utilising, about 12,000 of our clients have actually utilised the pattern recognition scanner so far. If you're a new user to pattern recognition, do get a chance to check it out, and just keep an eye on all the new alerts as they come in. Make sure you check the charts, and you'll see the price projections and everything else like that.
Hopefully you'll find it a useful support tool to help you make more informed trading decisions. Well, I hope that kind of explains a little bit more about pattern recognition, and that you guys at home get the most from it. It's probably also worth pointing out, as well, that there's actually also manual pattern recognition available across all of our products. So if I have a look at, say, the dollar right here, I go to patterns.
You can actually add these on manually. This doesn't alert you to the new price projection levels, but I can tell you that there's new opportunities right now. For example, it's hinting towards there being a trade opportunity coming now if this breaks out. So hopefully you guys will find that useful. Anyway, thank you very much for listening. Keep an eye on our YouTube channel for more helpful hints and tips. Take care and good bye.
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Welcome back! In my, I introduced a piece of software for market simulation and training in the Forex called. In case you missed the post,. Several traders who are using the product have said things like “it is a great tool”, “I’m in” and they are “seeing the market like never before”.
You will be glad you found. It earned my highest recommendation. In today’s blog, I would like to introduce you to a free training tool, one I know you will like. Learning to trade the Forex involves choosing a system and strategy that suits your personal style and trading approach. Every trader learns the basics like, and the like. You will no doubt also learn about trends and reversals, which help you “see” where the market is likely to move.
These insights are critical to your success. In addition, you will want to become an expert at chart patterns since they can explode your trading results. Forex CHART Patterns Experienced traders appreciate that one of the keys to trading success is chart patterns or formations. Most break out in the direction noted in the diagrams greater than 80% of the time. Knowing this will help you avoid bad trades — and help you get into good trades early. What is most important is that you learn to recognize the nuances of patterns in real charts, as they are never as “clean” as the few examples I have included here.
To be effective at recognizing Forex patterns, your brain needs to create a cognitive map, which is basically a database of things it accesses on a regular basis. The more you study, the more complete your internal pattern database will become and the better you will be able to recognize emergent formations. Some mentors teach that you need about 300 images of each pattern for your brain to “recognize” that particular formation effectively. Further, they contend that you need to be thoughtful when “programming” them into your brain and suggest learning them sequentially, that is, learning one pattern at a time. Some further suggest that you then need to give your brain a rest for a day – and only then learn the next pattern with its 300 images. You can do this by drawing descriptive lines on about 300 charts in a row. Since there are about 15 dominant formations in the Forex, you should repeat the process until you have stored around 4,500 images.
You might say, “that sounds like a lot of work”. But let me ask you, how valuable will it be when you can quickly and effectively identify formations, and use this knowledge every day to improve the results of your trading? Trainer To help you get started, here is a simple and free tool. You can load this program on your Windows desktop. It has a clean interface and it works like this. Press one of the buttons for a pattern you would like to learn and you will then see a chart pop open.
Look at the chart and see if you can find the pattern. When you think you have found it, use your mouse to paint the lines on the chart (screenshot). When you are ready, press the “Identify” button. The program then shows you where the pattern actually appears on the chart.
If you want to try again, hit the “Retry” button or go back to the main menu to try another. It is simple, easy and a great place to start learning since you can quickly see what a particular formation looks like on a real chart.
Once you feel comfortable with a particular formation, open your charting software and load any currency pair. Go back into the chart (60 minute or lower chart time-frame) and look for one pattern – say a “rising wedge” – over and over.
If you have drawing tools available (see the BONUS TOOL section below), use them to draw the pattern on the chart. Take screenshots if you can so that you can review later. Expect to make some mistakes as you learn. After you have completed a few dozen, you will probably notice two things: if the formation is not there, you will quickly move to the next period on the chart and keep looking. That is good — because the lack of a pattern is still information you can use.
Even more importantly, you will find yourself scanning ever more quickly – and when the pattern is there, you will recognize it and will usually be able to predict which direction the formation will breakout, too! Remember, as you are learning, complete 300 of one pattern, take a break for a day or so and then move to the next. I recommend that you do not try to do different formations on the same chart at the same time. Let your brain learn the right way(!) BONUS TOOL ZoomIt is a simple but very useful drawing tool which I have used for several years to annotate charts. You can get the free(!) drawing tools from the Microsoft technet site or Wow – two free tools!
Summary This simple but effective is the only interactive one I have found that focuses on teaching a trader to identify patterns. It is a great primer for novices or those who want more experience in this area. I recommend this tool. To download it, and complete the free registration at the bottom of the page.
And feel free to check out the other offerings on this interesting site. Until next time, Brad.