I used a stop loss order set a penny below the bottom of the chart pattern. Triangles: ascending, descending, and symmetrical.Scallops: ascending, descending, ascending and inverted, descending and inverted.Head-and-shoulders: tops, bottoms, complex top, complex bottom.Double bottoms and tops: all four combinations of Adam and Eve.Bump-and-run reversal: tops and bottoms.Broadening wedges: ascending and descending.Broadening: bottoms, tops, right-angled and ascending, right-angled and descending.I used the following 43 chart patterns in the analysis, but some only applied if they were busted. Sales happened when price dropped a penny below the bottom of the bearish chart pattern (or busted bullish one) or the opening price if the stock gapped open lower. If price dropped into aīear market while in the trade, that was fine. If the breakout from the chart pattern was in a bear market, I excluded the trade because I only wanted bull market results. The first chart pattern appeared in July 1991 and the last in March 2019, giving me 23,481 trades. Sell signal: Downward breakouts from various bearish chart patterns (or busted bullish patterns) provided the sell signal.The stop was not raised, but I did test trailing stops separately. Stop loss: A penny below the bottom of the wedge served as the stop price.Enter at that price or the opening price, whichever is higher. Place a buy stop a penny above the top of the chart pattern. Entry: Buy at the open the day after an upward breakout.However, the following analysis does give a real-world flavor for how well you might do trading chart patterns if you follow the pattern pair strategy. So buying an upward breakout from a rising wedge and selling at the double top I cataloged would be different than choosing to sell a different double top. There may be plenty of double tops over the years, for example, that I didn't catalog on the way to the one The databases I built over several decades doesn't identify every chart pattern. Trading Rising Wedges: Entry and Exit Conditions Table 10: Selling the first pattern which comes along works only when selling non-busted patterns.Table 9: Buy rising wedges when the breakout price is below the 200-day SMA.Table 8: Buy rising wedges when the breakout price is above the 50-day SMA.That combination works best in three of four cases. Table 7: Buy wedges with a short-term (up to 3 months) trend leading to the start of the pattern.Table 2: Avoid trading using busted patterns.Table 1: Trailing stops work best for busted patterns.Buy a busted rising wedge and sell an Adam & Adam double top ($10.28) Buy a busted rising wedge and sell an inverted roof ($11.39)

Buy a busted rising wedge and sell a busted diamond top ($13.91) Buy a busted rising wedge and sell an Adam & Adam double bottom ($14.18) I put the expected profit per trade, per share, in parenthesis. Trades and how much money you might make trading a pattern pair. Expectancy is a way of gauging winning and losing The following list shows the expected performance of chart pattern pairs, ranked by their expectancy. Buy a busted rising wedge and sell an ascending broadening wedge (19%) Buy a busted rising wedge and sell an inverted roof (20%) Sell an inverted and ascending scallop (25%) Here's a list of the top five performing sell signals, based on annualized gain (annualized because the hold time is often years, in parenthesis). On the sale side, you can sell the first bearish chart pattern which comes along or wait for your favorite bearish chart pattern to appear and sell then. This articles assumes you buy an upward breakout from eitherĪ rising wedge or a busted one (price breaks out downward, drops no more than 10%, reverses, and closes above the top of the pattern.

The figure illustrates the idea for trading pattern pairs, where price is the red line and the boxes are chart patterns.

Results: Non-Busted Buy, Non-Busted Sale.

Along the way, you give price a chance to rise far enough to overcome those trades which are The broadening bottom, hold for a few years, and sell when a double top appears and breaks out downward. The idea behind pattern pairs is to pick a chart pattern type (like broadening bottoms with upward breakouts) to buy and another to sell (like double tops). Bulkowski on Pattern Pairs: Rising Wedges

Broadening falling wedge