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Thread: P&F Super Pattern

An effective price pattern defined using properties of P&F charts.

#Superpattern #Pointandfigure #Definedge

 Point & Figure is an oldest charting method where price is plotted vertically, and the chart moves only when price moves. It is a different way of looking at the price, the objective box-value and reversal value offers advantage of identifying objective price patterns.
When price is moving up, it is plotted in a column of 'X'. When it is going down, it is plotted in a column of ‘O’. Normally, three-box reversal criteria is used to define the trend & reversal. Unlike a bar or candle, the P&F column can have multiple sessions in it.
Link to know more about the subject:
https://t.co/2xtLAVPBvm

See below chart. Price is in a strong uptrend, P&F chart would produce a long of column of 'X' with more number of boxes in it.
If such a trend is followed by some time bars without meaningful price correct, P&F chart would not move, and it will remain in column of 'X' in such a scenario.
If there is a price correction, P&F chart would turn to column of 'O'. If price correction is not large or significant, boxes in 'O' column would be less.
If it turns out to be a shallow correction and price bounces back immediately, it indicates that weak bulls are shaken and weak shorts are in - in a strong uptrend. There is a trade opportunity when price goes above previous high.
Column of ‘X’ in a P&F chart would go above previous high. It is known as a basic Double-top buy pattern when column of X goes above high price of previous column of X.
The strong trend should not be a corrective move. There has to be a breakout before that.

So, the pattern is: Breakout, strong trend, shallow retracement & follow-through price action.

How it is defined clearly and made objective on a P&F chart?
Breakout = Double-top buy

Strong trend= More than 10 boxes of 'X' after breakout

Shallow retracement = Not more than 4 boxes after strong trend

Follow-through = Double-top buy after correction
The trade plan is also objective. Buy upon follow-through breakout (double top buy) and place a stop-loss below the bottom of shallow retracement.

Initial stop-loss in affordable and risk-reward is high that makes it a tradeable pattern with positive expectancy.
Vice versa for bearish super pattern. The objective definitions can help us in trading this price pattern on any instrument and timeframe. I suggest Daily chart for EOD segment and one-min timeframe for intra & derivative trading. One-min on P&F is v different & useful timeframe.
The pattern was introduced in my book on P&F charts. It has clear entry-exit and risk management rules. The logic and definition is Super, hence I gave that name. I have defined many such price patterns using important properties of different charting methods.
This simple looking pattern & combination is a result of lots of efforts & experience. More filters & variations are possible. It can be traded objectively, or chart analysis can improve the results. It can also be traded in combination with candlestick patterns or other methods.
The pattern can help in identifying stocks in momentum, strong breakout and offer affordable RR. Most of the momentum indicators are in favor during such breakouts. The pattern and setup has stood the test of time for me. Its not about P&F, its about objective price setups.

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Prashant Shah
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@Prashantshah267
Back-testing of some candlestick patterns 🧵

I hv back-tested patterns shown below on 500 stocks (Nifty 500 stock group as on today) since inception on daily timeframe charts.

Below is some interesting information.


I was doing to design multi-chart setups. But the information in the thread can be useful for people practicing candlestick chart patterns. There are many patterns & we keep coming across more. The data can give you a rough idea about the past performance of patterns.

Patterns are defined based on the popular rules of identifying them. I have also tested bearish patterns for bullish trades and vice versa (Contra approach).

Criteria: Hit ratio & returns of pattern giving 1:1 risk-reward if the entry is at the closing price of the pattern.

Some top bullish patterns have below hit ratio:

Inverted Hammer or Shooting Star – 74.72%
Multi-Harami breakout - 65.23%
Bullish Harami cross – 64.6%
Bullish Kicker – 63.53% (Got better returns)
Bullish separating line – 61.69% (It has got better returns)


Doji breakout hit ratio is decent (63.71%) but occurrences are v high so need more confirmation.

Engulfing and Harami patterns have got better returns when traded at next candle of confirmation.
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Prashant Shah
Prashant Shah
@Prashantshah267
Thread: 5 Important bullish & bearish chart patterns in technical analysis.

Triangles, Broadenings and Rectangles.

#trading #investing

Many traders analyse and practice western chart patterns. There are many such patterns and enough is talked about them in various books and resources.
Long back, I read a book “Encyclopedia of Chart Patterns” by Thomas N. Bukowski. It’s a brilliant work (Must read).

He backtested many patterns & ranked them based on their performance. Most imp is that he separated the patterns based on their performance in uptrend & downtrend.
I read about those patterns at many other places & in different theories and I realised that most of them are-

-variations of broad category of patterns. I have bifurcated these patterns in various categories.

Triangles, Broadenings & Brackets or Rectangle patterns are most common & effective patterns. Below are 5 bullish & bearish proven, time-tested patterns of these categories.

Bullish Patterns:
Rectangle Breakout:
Horizontal pattern breakout. Price remains between two horizontal lines before upward brkout. Its a decent continuation breakout pattern when appears in uptrend. Reversal pattern when appear in downtrend (Decent Risk-reward). Tend to pullback
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Prashant Shah
Prashant Shah
@Prashantshah267
Nifty and RSI divergence. It is all about knowing your indicator well. Quick video (Hindi) :-)
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Prashant Shah
Prashant Shah
@Prashantshah267
Thread: Super trend indicator:

Developed by Olivier Seban, Super trend is an indicator plotted on the price chart like a moving average.


Let us discuss three important components of this indicator.

1: Range-price.

In every bar or candle, we have four prices - Open, High, Low, Close.

We have the option to select any price of above to define the trend.

For example, we may define an uptrend as today’s close being above yesterday’s close.

We can also calculate range price of every bar. It is also known as Average price or Mid-price.

Range price = (High + Low) / 2


Have a look at the images below.

In the first Image below , the closing price of each candle is connected to the closing price of the next candle.


In the below chart, the “range-price” or the mid-point of each candle is connected.
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Prashant Shah
Prashant Shah
@Prashantshah267
Thread: Central Pivot Range (CPR)

CPR is another popular tool. Three lines are plotted on the chart when we plot CPR.

The three lines are: CPR, TC and BC.

Let’s understand the calculation.


You may recall that I explained the calculation of Pivot levels in an earlier thread. CPR stands for Central Pivot Range. It is always a center line of the three lines that gets plotted in the chart.

CPR is a Pivot price. Pivot is average of HLC as explained in the prev thread.


We also discussed about Mid-range of the session. Mid-range is average of High and low price of the session.

The mid-range of the bar is known as BC in the CPR calculation. BC stands for Bottom central pivot.


Pivot level captures the relationship of the closing price to the range of the session.

Pivot price above mid-price = bullish pivot
Pivot price below mid-price = bearish pivot


So, CPR line is Pivot and BC line is Mid-range.

What is the difference between both?
Mid-range is average of High and Low.

Pivot is average of High, Low and Close.
What will make the difference between the two?

Close.
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