E eupoytraers.com Precision Pattern Trading Daryl Guppy www.guppytraders.com Trading, Better Stock Trading, Snapshot Author of | Share Trading, Market Trading Tactics,Chart ‘Trading, Trend Trading | Flagpole starts here guppytraders.comE eupoytraers.com The Anatomy of Pattern Trading * High probability trades Take profits of 33% in 6 days * Fast trades y : x * Simple profits * Good risk control . Project target We will show you pattern recognition Measure techniques and ways to manage pe risk in these high probability trades \, 2H Comi OBJECTIVES IN USING CHART PATTERNS * Recognise the rules for pattern identification « Identify patterns with confidence ¢ Set accurate targets and stop loss conditions bs a guppytraders.comeupoytraers.com PATTERN TRADING ADVANTAGES + Risk and reward is easily defined High probability of success Contingent buy and sell orders make it easy to manage the trade while doing other work Price projection target areas make it easy to manage trades * PATTERN TRADING DISADVANTAGES + The pattern can be part of a larger trend move so an early exit limits profits. 2H Comi A STRAIGHT LINE TO PROFIT ¢ Good pattern trading is based on chart reading * It calls for accurate trend line placement ¢ It requires good identification of support and resistance levels bs a guppytraders.comeuppytrader.com Everybody knows how to use trend lines Which trend lines are correctly plotted? a 28 25 2a 23 Pr) hisses Troca Toot" guppytraders.comeuppytrader.com Everybody knows how to use trend lines Which trend lines are correctly plotted? 2 26 26 24 23 22 24 Wrong au ie 18 Missed trading opportunities " 5 14 Wrong 1 8 42 4 10 1 os oe Correct te Os re ae 88 hises Teo00 Feact guppytraders.comleuppytraders.cont Everybody thinks they know how to use trend lines Confirms general direction but how does that help us trade? / I iW WRONG Nn Not enough rebound points to give confidence in the, trend WRONG Trend lines define our risk management and in pattern trading risk management is vital 2H ComE eupoytraers.com ss Trend Lines for Chart Patterns + Trend lines provide a trigger for action. Bee vi ; / My, Sa, ‘ H : pee , bite, MW J \ iN 2H ComE eupoytraers.com — Trend Lines for Chart Patterns Ab 6p fE eupoytraers.com ss Trend Lines for Chart Patterns pr Iw 2H ComUfevppytraders.com Trend Lines for Chart Patterns Trend lines provide a Wrong — Trend has clearly ended trigger for action. They tell us what to do. They do not tell the i! market what to do. | Need a minimum of three price reaction points to plot a trend line Use historical information to ti " validate your trend 1 ip i line plot \ Trend lines provide multiple correct solutions depending on the date of your trade, your time frame and trade purpose Wrong — Excludes significant rebounds 2H Comeuppytrader.com Support and Resistance Typical rally ! | and retreat | il above resistance Won aly It Ll ys Test Resistance fete A ee Test Retest i eile ‘Typical fast | break below \ support ' i it lypar'l All markets - reliabilty increases ‘with the number of tests and retests Too simple for words but difficult in practice 2H ComE eupoytraers.com ss Locating Support and Resistance Me war or (May [un ur aug (sep [oct Nov’ [owe [aogr Feb" | guppytraders.comAre the horizontal lines parallel or do they slope? This is not a cheap trick because it costs traders money guppytraders.comeuppytrader.com Locating Support and Resistance Without a grid to guide your eyes the Lines are plotted on areas where price has the most rebounds Levels are verified against historical levels Show where we expect prices to pause levels are more accurately established guppytraders.com 15 110 105 100 95euppytrader.com | Constructing a triangle ¢ Find the resistance level * Find the significant lows ¢ Project trend and | | resistance lines || 1 forward ¢ Project trend line back | * Measure base — Must be continuous price action in a single direction ¢ Project target 2H Comlfevppytraders.com Using Price Projections Create the triangle Measure the base Project target Usually minimum targets Define downside risk Select entry point Aggressive — before Conservative buy breakout HIE Aggressive buy Conservative — after breakout High probability hd pattern Downside target 80% success in bull markets 70% success in bear markets NE || ese comUsing Price Projections for Short Trading Short risk declines over time Measure the base Project target Define downside risk Double downside risk Select entry point Aggressive — before breakout Conservative — after breakout High probability pattern 85% in bear markets 70% in bull markets Create the triangle el ik Aggressive short ‘Conservative short Downside remains constant Downside can double ae guppytraders.comny guppytraders.com Using Equilateral or Symmetrical Triangles This is a low probability pattem It captures market indecision This pattern is driven by news Created by two valid but opposite trend lines Probability of success f pate 50% all markets breakout and rises Bear markets increase | the probability of if double dipping Risk has a higher probability of doubling in a bear market eee guppytraders.com, J guppytraders.com i Timing Triangle Entry Breakout target + Time the entry is a balance between two factors: + Early correct identification. Risk is that identification is ‘wrong — Area B + Delayed for full identification . Risk is that the trader misses the breakout, or breakout is weak. Area C + Divide developing pattern into thirds + Pattern has a time limit. bs a guppytraders.comny guppytraders.com: | Constructing a Bullish Flag This is a high probability pattern. Target projection falls with time 85% in bull markets. 75% in bear markets Starts with 1 to 5 large range days in a single direction Flag is a retracement | with parallel sides Top edge is set first Bottom edge is ‘“ inferred Price target is based f on flagpole height Breakout is powerful Slow breakouts show 4 pattern failure {} u Flagpole starts here 2H ComFE leuppytraders.cont The Stirrup Pattern * Is this a safe entry point for a trend continuation? bs a guppytraders.comeuppytrader.com Constructing a Stirrup Pattern This is a continuation pattern with a set target Starts with a sudden price drop not dividend related Project Key feature is upward sloping triangle Target Once breakout is confirmed, pattern measurement and price projection is applied l Pattern projection is F m Entry not based on triangle [a trigger I I guppytraders.comny guppytraders.com: Constructing a Stirrup Pattern + This is a continuation pattern with a set target + Starts with a sudden price drop not dividend related. + Key feature is upward sloping triangle + Once breakout is confirmed, pattern measurement and. price projection is applied. + Pattern projection is not based on triangle guppytraders.comlf a J ny guppytraders.c Pattern Trading ° Want detailed pattern trading strategies with real trades? ¢ These and other short term tactics are covered in SNAPSHOT TRADING 4) oS eA IN Ct TUTORIALS IN APPLIED Ie TECHNICAL ANALYSIS ‘Trading Techniques Weekly CecPou _———eaa : aie DISCLAIMER Guppytraders.com (ACN 089 941 560) Pty Ltd is not a licensed investment advisor The analysis notes in this presentation are based on our experience of applying technical analysis te the market and are designed to be used as a tutorial showing how technical analysis can be applied to a chart example based on recent trading data, These presentation notes are a tool to assist you in your personal judgment by improving your knowledge of charting and technical analysis techniques, It is not designed to replace your Licensed Financial Consultant or your Stockbroker. 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