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Patterns

This chapter covers patterns in Trading Conceiver.


Patterns in Trading Conceiver

The Patterns Branch

Expand the Patterns Branch To view the implemented patterns, in the Composer tab select the branch: 
  Patterns

The Description Pane

Pattern Description As usual, by selecting one of the trading algorithms, a candlestick pattern in this case, a description appears in the bottom left pane.
Introduction / Definition
A brief introduction or definition comes first.
Drawing of the Pattern
A drawing of the pattern is depicted. The bars represent the high-low range.
Bars Counting
The bar when the pattern is matched is labeled n; this is the last bar of the pattern. Previous bars in the pattern are labeled n-1, n-2... This counting highlights the fact that, to match a pattern, you have to look into the past, not into the future, and you can say a pattern is found only at the very last bar.
Interpretation
Here you can find how to interpret the pattern, according to the literature.
Literature Signals
This is what literature usually says about the phase of the market implied by the matched pattern, like uptrend, downtrend or congestion and, consequently, the action to take, like go long, short, liquidate, hold. Do NOT rely on the signals listed here! Decisions are up to you! These are only notes / remainders of what you can find in bibliography. Any decision is legitimate, even the exact opposite of what is reported by reputable authors. Moreover, a single pattern seldom can give reliable signals; these must always be confirmed by other algorithms.
Hint / Note
Here some notes might be reported. For instance, some algorithms, written with a blue text, are known before closing, i.e. at open and / or during the day, and this fact might be highlighted here.
Parameters
Some patterns require input parameters from the user. If the meaning or range of such parameters is not readily clear from the description or from the formulae, some elucidation could be reported in this section.
Formulae
Here the precise conditions that must be satisfied in order to match the pattern are listed. These are all and only the conditions we check, i.e. they are necessary and sufficient, meaning all of them must be true, and there are no other checks performed. So this is the real definition of the pattern. In order to make this section more readable, sometimes we prefer a more natural language instead of real mathematical formulae, unless strictly unavoidable. Otherwise, for instance, instead of 
  day n-1 is an inside day
we should have written 
  • high(n-2) > high(n-1)
  • low(n-2) < low(n-1)
Boolean Logic
A bar pattern is true when the pattern is matched. This is the logic used in the Composer. Remember that a pattern is matched at the last bar of the pattern.

How to Trade a Pattern

How to Trade a Pattern
Select It
Select the pattern of your choice in the tree and then press one of the selection buttons in the Composer. The pattern will appear in the corresponding logical slot. If parameters are present for the algorithm, choose values you deem appropriate. Don't rely on default values, as there is nothing peculiar in them.

Output Manipulation

For the checkboxes: 
  NOT
  Step
  Extend
refer to the chapter about the algorithms based on technical indicators.

Patterns Are Matched at the Last Instant in Time

Patterns are matched at the last instant in time when the pattern is concluded. If the pattern is made up of more than one bar or candle, the match is on the last bar, not during the previous bars. It is only when the pattern is completed that we know the pattern is matched. While the pattern is forming, we don't know that. If we indicated a pattern as matched even during its formation, we would be predictive, meaning we could look into the future.
Intraday
A pattern is not necessarily concluded at Close. It can complete even intradaily.

In Charts

Refer to the chapter about the algorithms based on technical indicators.
Dedicated Indicators
The indicators dedicated to watching where an algorithm is true, i.e. those found in the branch 
  Trading Algorithms
are true when the algorithm is matched. In the case of patterns they are true where the pattern if fully developed.
Example
How to Watch Where the Pattern is Detected: Charts The picture on the side depicts the Outside day downside breakout, a three bars pattern, highlighted in yellow. Note that the match is in correspondence of the last candle of the pattern. More precisely, it is located at half of the candle, because that's when the pattern is known, intraday, i.e. during the day, before Close.

In Tables

Refer to the chapter about the algorithms based on technical indicators.
Example
How to Watch Where the Pattern is Detected: Table The picture on the side depicts the same pattern as in the previous section. The same considerations apply. The match is in correspondence of the last candle of the pattern. More precisely, it is located at the Threshold, because that's when the pattern is known, intraday, i.e. during the day, before close.

Implemented Patterns

The following patterns are implemented:

Minima / Maxima:
  • Maxima
  • Asymmetrical maxima
  • Minima
  • Asymmetrical minima

Gaps:
  • Gap up
  • Opening gap up
  • Gap down
  • Opening gap down

Inside / Outside:
  • Inside day
  • Inside day upside breakout
  • Inside day downside breakout
  • Outside day
  • Outside day upside breakout
  • Outside day downside breakout