Apr

19

 I claim that all well-known technical chart patterns that are capable of quantification have an opposite predictive power to that posited in the books on technical analysis from Magee to the updates at the top the list is the triple and quadruple top (there's one right now).

Philip McDonnell added:

One is reminded of the paper by Andrew Lo which tested something like 65,000 technical patterns. It found that the double top and double bottom patterns worked and were statistically significant even after adjusting for the serious amount of data mining.

Andrew W. Lo writes: 

I believe [Vic's claim]. No pattern can truly be 100% consistent, otherwise it would be exploited to its limit… The problem is when it seems to works 52% of the time.

Rocky Humbert writes:

My former partner was fond of saying, "There are double tops, and triple tops. But no quadruple tops." Importantly, he is my "former" partner….

Anatoly Veltman writes: 

In the upside down, they say that only cats have four legs.

Craig Mee writes: 

In my opinion, technicals have everything to do with quantification of patterns and allowing for the edges to play out just like any area of business you're trying to gain an edge. The larger the patterns IE 1 hr to 4hr, D to W, and the stronger the boxes ticked in one's strength meter, the more risk, and a little more risk/reward is expected on the trade. One might say all head and shoulders or double or triple tops are not equal.

The risk appears to lie in the fact that most technical traders move off the course, trade too many patterns from trend line breaks to wedges, etc, over too many markets over too many time frames, and thus the edge they're trying to work with or look for is blunted.


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