Subscribe to RSS feeds Bulkowski Blog via RSS

Thomas Bulkowski’s successful investment activities allowed him to retire at age 36. He is an internationally known author and trader with 30+ years of stock market experience and widely regarded as a leading expert on chart patterns. He may be reached at

Support this site! Clicking the links (below) takes you to Amazon.com. If you buy ANYTHING, they pay for the referral.

Picture of Bumper.
Kindle
Paperback
Nook
Picture of the head's law.
Kindle
Paperback
Nook
Chart Patterns: After the Buy
Getting Started in Chart Patterns, Second Edition book.
Trading Basics: Evolution of a Trader book.
Fundamental Analysis and Position Trading: Evolution of a Trader book.
Swing and Day Trading: Evolution of a Trader book.
Visual Guide to Chart Patterns book.
Encyclopedia of Chart Patterns 2nd Edition book.

Bulkowski’s Pattern Styles

Class Elliott Wave Fundamentals Psychology Quiz Research Setups Software Tutorials More...
Busted
Patterns
Candles Chart
Patterns
Event
Patterns
Small Patterns
Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 09/19/2017
22,371 39.45 0.2%
9,507 -7.56 -0.1%
737 -2.02 -0.3%
6,461 6.68 0.1%
2,507 2.78 0.1%
YTD
13.2%
5.1%
11.7%
20.0%
12.0%
Tom's Targets    Overview: 09/14/2017
22,450 or 21,500 by 10/01/2017
9,750 or 9,200 by 10/01/2017
775 or 730 by 10/01/2017
6,650 or 6,200 by 10/01/2017
2,600 or 2,425 by 10/01/2017

Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information.

My book, Encyclopedia of Chart Patterns Second EditionEncyclopedia of Chart Patterns 2nd Edition book., shown on the left, discusses the performance statistics and details of 63 event and chart patterns. There is no better reference for chart and event patterns.

If you click on this link and then buy the book (or anything) at Amazon.com, the referral will help support this site. Thanks. -- Tom Bulkowski

$ $ $

This article discusses new research that answers the question, which chart patterns are best for position and swing trading?

Pattern Style Summary

I wondered if some chart patterns were better suited to swing trades than position trades. Swing traders attempt to buy at or near a minor low and ride price upward to a minor high, where the trade ends. The reverse is also true, when the swing goes from minor high to low. The duration of the swing is often short, measured in weeks or a few months.

Position traders try to catch the longer-term price trend. The long-term trend includes many minor low and high swings (or the reverse, high to low) and the trade usually lasts at least 3 months, but can extend to over a year. Although the hold time can be long, it's not buy-and-hold, where an investors holds onto the stock for years, often through bull and bear markets.

I expected to see the usual players at the top of the list, but the results surprised me. Chart patterns that I hadn't considered viable trading candidates (such as three rising valleys, scallops, long islands, and diamonds) topped the list. Those that I trade often were buried lower in the list.

Refer to the tables below for the results.

Top of page   More

Pattern Style Methodology

I used the results from my book, Encyclopedia of Chart Patterns Second EditionEncyclopedia of Chart Patterns 2nd Edition book. to build the tables below, but also included new chart patterns, such as Big W, roof, and inverted roof.

First, I ranked the statistics by average rise or decline. The average rise or decline is a measure from the breakout to the ultimate high or low. The ultimate high or low is the highest high or lowest low before a trend change (a move of at least 20% in the opposite direction). I was looking for the chart patterns with the highest average move.

Then I ranked the statistics by the hold time, which is the time it took price to move from the breakout of the chart pattern to the ultimate high or low. The quicker price can reach its target, the more powerful the chart pattern.

After that, I summed the two ranks and then sorted the list by the sum. That sum, as well as the other statistics, appear in the tables.

For upward breakouts, I assigned "swing" trades to those that took less than 2 months (62 calendar days) to reach the ultimate high, and "position" trade to everything else. For downward, breakouts, I used the median hold time as the separator between "swing" and "position" since the chart pattern hold times were shorter. The median is 49 days.

Top of page   More

Pattern Style Upward Breakouts

The following is for chart patterns in bull markets with upward breakouts. The list is sorted by the sum column. See Methodology for an explanation of the columns. A rank of 1 is best.

FormationAverage
Rise (%)
Days to
Ultimate High
Avg Rise
Rank
Hold Time
Rank
SumTrade
Style
Flags, High and Tight6939134Swing
Three Rising Valleys4112571320Position
Scallops, Ascending and Inverted4313752025Position
Diamond Bottoms36119171128Position
Islands, Long316726430Position
Wedges, Falling3211625934Position
Triangles, Descending4717823436Position
Rectangles Bottoms4617733336Position
Broadening Wedges, Ascending38161112536Position
Double Bottoms, Adam & Eve37160142337Position
Double Bottoms, Adam & Adam35136181937Position
Double Bottoms, Eve & Eve4017083038Position
Triangles, Symmetrical31124261238Position
Rectangles Tops3917093039Position
Rounding Tops37161142539Position
Broadening Tops2911630939Position
Pennants252237239Swing
Diamond Tops278135540Position
FormationAverage
Rise (%)
Days to
Ultimate High
Avg Rise
Rank
Hold Time
Rank
SumTrade
Style
Flags231739140Swing
Double Bottoms, Eve & Adam35160182341Position
Broadening Wedges, Descending33131241741Position
Big W31128261541Position
Triple Bottoms37165142842Position
Head-and-Shoulders Bottoms38176113243Position
Broadening Bottoms2711235843Position
Roof, Inverted258937643Position
Pipe Bottom4519444044Position
Rounding Bottoms4318953944Position
Wedges, Rising28127321446Position
Broadening Formations, Right-Angled and Ascending29131301747Position
Scallops, Descending2210641748Position
Bump-and-Run Reversal Bottoms38186113849Position
Head-and-Shoulders Bottoms, Complex3925794150Position
Cup-with-Handle34167222951Position
Horn Bottoms35180183553Position
Scallops, Ascending31162262753Position
Broadening Formations, Right-Angled and Descending28146322153Position
Triangles, Ascending35185183654Position
Roof28152322254Position
Islands Reversals23128391554Position
Ugly Double bottoms34185223658Position
FormationAverage
Rise (%)
Days to
Ultimate High
Avg Rise
Rank
Hold Time
Rank
SumTrade
Style
Top of page   More

Pattern Style Downward Breakouts

The following is for chart patterns in bull markets with downward breakouts. The list is sorted by the sum column. See Methodology for an explanation of the columns. A rank of 1 is best.

FormationAverage
Decline (%)
Days to
Ultimate Low
Avg Decline
Rank
Hold Time
Rank
SumTrade
Style
Islands, Long-2227235Swing
Diamond Bottoms-2135448Swing
Pennants-19169110Swing
Broadening Wedges, Descending-20407714Swing
Rounding Tops-194591423Swing
Three Falling Peaks-173619524Swing
Flags-161725227Swing
Diamond Tops-215242428Position
Double Tops, Eve & Eve-1844161228Swing
Head-and-Shoulders Tops, Complex-236012829Position
Roof, Inverted-195092029Position
Double Tops, Adam & Adam-195192332Position
Head-and-Shoulders Tops-226223133Position
Triangles, Symmetrical-1745191433Swing
Double Tops, Adam & Eve-1849161935Position
Scallops, Descending-1747191736Swing
Broadening Bottoms-154029736Swing
Triple Tops-196092837Position
FormationAverage
Decline (%)
Days to
Ultimate Low
Avg Decline
Rank
Hold Time
Rank
SumTrade
Style
Horn Tops-216743438Position
Double Tops, Eve & Adam-1543291039Swing
Wedges, Falling-1543291039Swing
Wedges, Rising-143835641Swing
Triangles, Ascending-196493342Position
Broadening Formations, Right-Angled and Descending-1545291443Swing
Pipe Tops-207573744Position
Islands Reversals-1753192544Position
Rectangles Bottoms-144135944Swing
Bump-and-run Reversal Tops-196893645Position
Triangles, Descending-1650252045Position
Scallops, Inverted and Descending-1861163046Position
Rectangles Tops-1756192746Position
Broadening Formations, Right-Angled and Ascending-1547291746Swing
Scallops, Ascending-1444351247Swing
Broadening Tops-1550292049Position
Cup-with-Handle, Inverted-1653252550Position
Broadening Wedges, Ascending-1763193251Position
Roof-1667253459Position
FormationAverage
Decline (%)
Days to
Ultimate Low
Avg Decline
Rank
Hold Time
Rank
SumTrade
Style

-- Thomas Bulkowski

Top of page   More  

See Also

Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information. There are two ways to write error-free programs. Only the third one works.