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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

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Bulkowski's Small Pattern Performance

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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.

This article compares the performance of small chart patterns.

I don't have a definition of what a "small" chart pattern is, but I include those that are a few bars wide.

The longest, is the NR7, which is seven bars long.

Small Patterns: Upward Breakout Performance

Table 1: Performance of Small Patterns with Upward Breakouts
Pattern Name Average 
Gain
 Percent 
Wins
 Hold 
 Time 
 Rank 
Downside weekly reversals$132.3960%361
Open-close reversal, uptrend$118.6759%312
Key reversal, downtrend$95.2858%283
Wide ranging day downside reversal$92.0458%294
Open-close reversal, downtrend$90.3158%305
Outside Days$90.1658%296
Narrow range 4$89.2058%307
Upside weekly reversals$84.5857%368
Hook reversal, downtrend$81.5057%269
Inside Days$79.8238%2810
Narrow range 7$78.7957%3111
Wide ranging day upside reversal$75.9856%2712
Hook reversal, uptrend$75.9557%2813
3L-R$75.9357%2614
Pivot point reversal, uptrend$73.5657%2915
Key reversal, uptrend$71.1156%3016
Pivot point reversal, downtrend$71.0356%2817
Shark-32$69.5556%2618
Inverted gap2H$65.4456%2919
One day reversal, bottom$61.3556%2720
Gap2H$56.0855%2821
One day reversal, top$46.1254%2922
Closing price reversal, downtrend$0.0952%2823
Pattern Name Average 
Gain
 Percent 
Wins
 Hold 
 Time 
 Rank 

Table 1 shows the performance of small chart patterns based on the average gain.

In the tests of each pattern, I used a 7% gain for the profit exit and a 7% drop as the loss exit. In other words, after entering a trade, I set a profit target of 7% above the entry price. If the stock climbed 7%, the stock was sold for a 7% gain less $20 round trip commissions ($10 each way).

If the stock broke out upward but then dropped, the position was sold if the stock dropped 7% from the buy price. Averaging the results for all trades using the pattern gave the average gain, which I show.

The percent wins column is the percentage of times the chart pattern won.

The hold time is the duration of the trade, in calendar days.

The rank is a number for 1 (best), sorted by the average gain.

As the table shows, small patterns are not huge winners. Each trade began with $10,000, so they won $680 or lost $720 (it should be $700 each except for commissions and slippage).

Trades could make more or lose more if the stock gapped higher or lower.

Notice that the average gain is tiny -- $132 -- compared to $700 (a 7% gain).

 

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Small Patterns: Downward Breakout Performance

Table 2: Performance of Small Patterns with Downward Breakouts
Pattern Name Average 
Gain
 Percent 
Wins
 Hold 
 Time 
 Rank 
Wide ranging day downside reversal($35.77)46%241
Upside weekly reversals($40.89)47%292
Open-close reversal, downtrend($47.93)45%283
Wide ranging day upside reversal($53.46)46%254
Narrow range 7($55.52)45%255
Pivot point reversal, downtrend($55.99)45%266
Hook reversal, downtrend($58.02)45%247
Narrow range 4($62.95)44%268
One day reversal, bottom($69.57)44%249
Inverted 3L-R($72.32)44%2510
Gap2H($72.55)44%2311
Inside Days($75.73)43%2512
Shark-32($76.36)43%2313
Open-close reversal, uptrend($76.87)43%2814
Outside Days($77.81)43%2715
Hook reversal, uptrend($77.94)43%2616
Inverted gap2H($84.45)43%2417
Key reversal, downtrend($88.09)43%2518
Pivot point reversal, uptrend($96.35)42%2619
One day reversal, top($97.80)42%2820
Key reversal, uptrend($108.82)41%2721
Downside weekly reversals($135.13)40%3322
Closing price reversal, uptrend($137.97)39%2723
Pattern Name Average 
Gain
 Percent 
Wins
 Hold 
 Time 
 Rank 

Table 2 uses the same method as Table 1 except that the patterns listed had downward breakouts. That is, all trades began with $10,000. All shorted the stock and looked for price to drop 7% in a bull market. If it did not, a stop placed 7% above the entry price closed out the trade for a loss.

Commissions were $10 per trade or $20 round trip.

In this case, the average gain column actually shows a loss on every pattern! In other words, none of the chart patterns made money by shorting the stock.

-- Thomas Bulkowski

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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. In prison you get time off for good behavior. At work, you get rewarded for good behavior with more work.