usdcad.15M, butterfly
Mates, after years of market reasearch during which I found tens of thousands of patterns with the software that I have created I realized some interesting things about pattern trading. Below I will enumerate my observations.
#1. XA leg (XC for cyphers/sharks) should lay somewhere in the range of 10-30 times of the average candle range. To canlculate the range I simply used ATR indicator with a period of 10 000. It increases the probability of win up to 8%. For example, if your win rate was 50% you may increase it using this filter to 58%.
#2. If price hits 1.414X-point there's an 83.33% probability of it to go further to 1.618XA rather than reverse and go to tp1 level. (with target adjustment). Consequently, there's only 16,66% chance to win in this situation. In butterfly patterns, if you enter at 1.272XA the distance towards the st0p is almost 2 times smaller than the distance towards 1.618XA. It is not reasonable to have such a large risk only to decrease the number of your losses by 16,66%.
#3. In many cases price reverses before 1.272XA level. A famous tradeempowered variation of a butterfly utilizes this phenomena placing the entry at 1.272AB instead. I didn't do any attempt to find the sacred fib level (square root of square root of square root of the golden mean, for example. ahahahaha)... Instead, I just calculated the worst case scenario reversal. Many of you already understood what I did.... Yep, because of target adjustment if price doesn't reverse exacly at the D-point and first goes closer to 1.414XA then we are to restretch the fibs and recalculate our targets levels (new 38.2 and new 61.8). So, the worst case reversal scenario is the situation when price reverses one decimal of a pip before 1.414XA (1.414XA is stoploss, read above). In this case, we have the smallest target. So, I found the level where my smallest target size equals to my risk size. An this is exactly 1.144XA. My research shows that the level is dramatically precise. The traditional 1.272XA is way too far thus we miss too many good opportunities. To my mind, market movers tend more to have a good bargain rather than respect the sacred fibs!!
Hope, you find the information useful.
Best Regards,
Alexander Nikitin. A professional trader and a programmer.
#1. XA leg (XC for cyphers/sharks) should lay somewhere in the range of 10-30 times of the average candle range. To canlculate the range I simply used ATR indicator with a period of 10 000. It increases the probability of win up to 8%. For example, if your win rate was 50% you may increase it using this filter to 58%.
#2. If price hits 1.414X-point there's an 83.33% probability of it to go further to 1.618XA rather than reverse and go to tp1 level. (with target adjustment). Consequently, there's only 16,66% chance to win in this situation. In butterfly patterns, if you enter at 1.272XA the distance towards the st0p is almost 2 times smaller than the distance towards 1.618XA. It is not reasonable to have such a large risk only to decrease the number of your losses by 16,66%.
#3. In many cases price reverses before 1.272XA level. A famous tradeempowered variation of a butterfly utilizes this phenomena placing the entry at 1.272AB instead. I didn't do any attempt to find the sacred fib level (square root of square root of square root of the golden mean, for example. ahahahaha)... Instead, I just calculated the worst case scenario reversal. Many of you already understood what I did.... Yep, because of target adjustment if price doesn't reverse exacly at the D-point and first goes closer to 1.414XA then we are to restretch the fibs and recalculate our targets levels (new 38.2 and new 61.8). So, the worst case reversal scenario is the situation when price reverses one decimal of a pip before 1.414XA (1.414XA is stoploss, read above). In this case, we have the smallest target. So, I found the level where my smallest target size equals to my risk size. An this is exactly 1.144XA. My research shows that the level is dramatically precise. The traditional 1.272XA is way too far thus we miss too many good opportunities. To my mind, market movers tend more to have a good bargain rather than respect the sacred fibs!!
Hope, you find the information useful.
Best Regards,
Alexander Nikitin. A professional trader and a programmer.
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