We'll help you map out a plan to fix the problems in your trading and get you to the next level. Answer a few questions on our application and then choose a time that works for you.
BOOK YOUR FREE STRATEGY SESSION NOW >>Discretionary traders often use price patterns to decide how to manage positions.
Many patterns cannot be clearly coded because they involve graphical configurations.
At Unger Academy®, we have developed our own libraries of pre-coded price patterns that can be easily applied to systematic trading.
In this video, we show you an application example of one of our most effective patterns: the Daily Factor.
This price pattern evaluates the relationship between the body and the range of a daily bar.
As shown in the video, this pattern can be used to filter trades and improve strategy effectiveness.
If you want to learn more about the Daily Factor, our patterns, and how we use them for better performance, don't miss this video!
Enjoy 😉
How are patterns used in systematic trading?
Hello everyone and welcome!
As you can see on my screen, in this video we're going to be talking again about patterns and their use in trading.
We know that Candlestick Patterns are tools, or price configurations, that are widely used especially among discretionary traders.
However, most of them are not codifiable, and can't be described by strict rules.
So, what can we systematic traders, who are obliged to define the rules of trading systems clearly and unambiguously, do?
I'm one of the coaches at the Unger Academy and today we'll try to answer this question.
The Trading System on Crude Oil used for testing
Alright so, as usual, we'll start with an already semi-finished trading system.
This system is a very trivial breakout system where new positions are opened in an attempt to follow the current trends of the market.
For example, let us look at the last trade. This was a short trade. So we sell a contract at the lows of the previous session and then close out the positions at the end of the day.
The code of this trading system is very simple. It was created using our proprietary Composer software with simple inputs.
So let's go through this very straightforward trading system and let's analyze its performance on Crude Oil.
We have created a chart from 2010 with the Crude oil price performance on a 15-minute time frame.
If we open the trades at the breakout of the high and low of the previous day, we get an equity curve like this. It seems to be a pretty good and rising curve in one part of its history, but it's definitely not going anywhere in the remaining part, where it is performing pretty badly.
Filtering trades with patterns: the Daily Factor
Now, in this video we're talking about patterns, price configurations that may help us select the right trades. In other words, we could filter the trades when a certain price pattern or price configuration occurs.
Of course, our configurations aren’t the most classic ones, like a double low, a double high or even a flag.
The patterns we use are a little bit different, and for this purpose, I want to show you one of the most effective patterns we have and use at Unger Academy.
This pattern is called Daily Factor. We see it on this slide.
For this pattern, we use the daily candlestick, the candlestick that is formed by considering the price swing of the entire session and distinguishing between Body and Range.
The Range of the candlestick shows us the distance between the high and the low reached in the session. The Body shows us the distance between the Open and the Close of the candlestick.
I've drawn you a white bar here. However it doesn't matter if it's a black bar, a white bar, a green bar, or a red bar, or if the Close is greater than the Open.
What we're interested in when dealing with the Daily Factor is the ratio.
The ratio between the Body and the Range. The Body is the absolute value of the difference between the Open and the Close, and the Range is the High minus the Low).
So we'll make our breakout entries in favor of the trend, only if we get this price configuration in the previous session.
Testing the Daily Factor on the example system
In the codes that we provide to our students, we've pre-coded all the patterns we normally use for simplicity.
In order to test this pattern, we only need to change the inputs to allow long and short trade entries using pattern number 1, which is the Daily Factor.
So, I'll write that I'll use pattern number 1 for long entries and short entries.
We give our okay, and you see that at the end we have this trade, and the trade in this session is already gone.
How does that happen? Because the Body in the previous session was more than 50% of the range. We opened at the lows and closed at the highs.
Now let us take a look at the performance. As you can see, it has improved. We've gone from the over 3,000 trades that we had before, with an average trade of $4-5, to an average trade of $50 and 1,800 trades.
The equity line has also improved. We still have a bad period, from 2023, but the filter work is far from over.
So, we could look at other price configurations to improve our trades even further.
Our patterns
Now I've not spoken specifically about the exits, the take profit and the stop loss, because I wanted to focus on the method through which we use the price patterns.
There are already a lot of them. As I mentioned, they are all already coded and introduced both in the Composer software and in the templates we provide to our students.
Final thoughts
If you don't have the experience to master these tools yet, and maybe need help to invest systematically in the markets, you can access a page through the link below where you'll find some handy resources.
From there you can watch a free video presentation by Andrea Unger or order your copy of our best-selling book, "The Unger Method," paying only the shipping costs.
Then, finally, you can also book a free call with a member of our team to get strategic advice.
Finally, if you have not done so already, I'd like to remind you to subscribe to our channel so that you'll be notified immediately when new videos are published, and to leave us a "Like" if you found this content interesting.
We will see you again soon with more insights and ideas on systematic trading.
Goodbye, until the next time!
We'll help you map out a plan to fix the problems in your trading and get you to the next level. Answer a few questions on our application and then choose a time that works for you.
BOOK YOUR FREE STRATEGY SESSION NOW >>Andrea Unger here and I help retail traders to improve their trading, scientifically. I went from being a cog in the machine in a multinational company to the only 4-Time World Trading Champion in a little more than 10 years.
I've been a professional trader since 2001 and in 2008 I became World Champion using just 4 automated trading systems.
In 2015 I founded Unger Academy, where I teach my method of developing effecting trading strategies: a scientific, replicable and universal method, based on numbers and statistics, not hunches, which led me and my students to become Champions again and again.
Now I'm here to help you learn how to develop your own strategies, autonomously. This channel will help you improve your trading, know the markets better, and apply the scientific method to financial markets.
Becoming a trader is harder than you think, but if you have passion, will, and sufficient capital, you'll learn how to code and develop effective strategies, manage risk, and diversify a portfolio of trading systems to greatly improve your chances of becoming successful.
