Pattern Recognition Traders - Single Biggest Mistake

The Biggest Single Mistake Pattern Traders Make

You're Ignoring 50% Of The Data Available

If you're new to what we do here at XABCD Trading, you might be making this pattern recognition problem yourself...

If you're drawing patterns or using software to do it for you ...using price (and not measuring time), then you're ignoring half the data available to you. Patterns will have different shapes if you do not use time. This is why our specific XABCD Pattern Suite will use both time and price measurements to avoid any issues.

We would argue that time would have an equal or almost greater importance to price when using patterns.

The above chart shows 3 patterns ONLY using price. Each pattern "looks" different but all the ratios are the same. The difference is the time it took to form the pattern. This is why using time and price measurements will lead to a more consistent pattern.

Solution: Measure Time For Greater Consistency.

Our XABCD Pattern Suite will calculate the time and when you use the drawing tools or automatic indicator to plot the pattern, the edges of the pattern will appear white if there isn't enough time or blue if there is enough time.

They all look very different and this is why time matters. If price and time are used, you'll get a more consistently shaped pattern.

This pattern has enough time built into it because all the edges of the pattern are blue.

The pattern below shows some legs of the pattern being "white" which tells us that the time measurements do not provide enough distance between each pattern leg.

The rule to remember: All legs should be blue to remain consistent with time and price measurements. This will include 4 price ratios, 4 internal time ratios and 3 external price ratios.

Can't Get Software To Automatically Do this For You?

If you can't automate this using software like ours for your pattern recognition, I would recommend making sure your distances equal a minimal value that you would set. This way, if anything each pattern you're looking at is more consistent with time and will look like a similar shape.