Tuesday, December 09, 2014 11:41:10 AM
Hey Lowtrade, I recently discovered a Fibs ratio pattern called the "cipher pattern" through a pro currency trader and have done some research into it. According to Jason Stapleton (the aforementioned trader) this pattern is successful about 80% of the time, working solely off of the principles of Fibs retracement and Fibs extensions and how the market typically reacts to those levels.
The rule is to find an impulse move and call it leg X to A that retraces to B at a Fibs level between 0.328 and 0.618 and then bounces to C that extends beyond A (breaking above it) to between the 1.272 and 1.414 levels (27% to 41% of the X to A move above A) and then breaks back down (below A) to D at the 0.768 retracement level of the X to A leg. This completes the pattern. A bounce is expected from here (in the opposite direction of the C to D leg).
The stop is placed about 10 ticks below X for going long or above X for shorting. The first target is the 0.618 retracement level of the C to D leg and the second is the 0.382 level.
This works out to a 1:1 risk/reward ratio for the first target, but if the pattern is successful 80% of the time, this would still be a great trade set-up.
I'm wondering, do you, or anyone else reading this for that matter, know anything about this pattern? Would you expect it to work as successfully on securities as it does for forex and currency trading? It seems to me that human psychology ultimately drives the market, which is what makes patterns work in the first place, and that what works on one market should work on all about the same.
I found what I think constitutes a valid cipher pattern in the stock BRFS, you can have a look at it below:
Included in the image is the web address of a new charting site that I recently discovered called "tradingview.com". I find it as a good alternative to stockcharts, offering everything that stockcharts does (in terms of indicators and overlays), but less clunky and time consuming when it comes to researching price history in a way that you're "zoomed in" and can see what's actually happening, without bars that are squeezed to nearly nanometer widths.
BTW, the stop, buy, and target for this BRFS cipher pattern are: 21.96 23.21 and 24.75, respectively. The second target is about 25.69.
The rule is to find an impulse move and call it leg X to A that retraces to B at a Fibs level between 0.328 and 0.618 and then bounces to C that extends beyond A (breaking above it) to between the 1.272 and 1.414 levels (27% to 41% of the X to A move above A) and then breaks back down (below A) to D at the 0.768 retracement level of the X to A leg. This completes the pattern. A bounce is expected from here (in the opposite direction of the C to D leg).
The stop is placed about 10 ticks below X for going long or above X for shorting. The first target is the 0.618 retracement level of the C to D leg and the second is the 0.382 level.
This works out to a 1:1 risk/reward ratio for the first target, but if the pattern is successful 80% of the time, this would still be a great trade set-up.
I'm wondering, do you, or anyone else reading this for that matter, know anything about this pattern? Would you expect it to work as successfully on securities as it does for forex and currency trading? It seems to me that human psychology ultimately drives the market, which is what makes patterns work in the first place, and that what works on one market should work on all about the same.
I found what I think constitutes a valid cipher pattern in the stock BRFS, you can have a look at it below:
Included in the image is the web address of a new charting site that I recently discovered called "tradingview.com". I find it as a good alternative to stockcharts, offering everything that stockcharts does (in terms of indicators and overlays), but less clunky and time consuming when it comes to researching price history in a way that you're "zoomed in" and can see what's actually happening, without bars that are squeezed to nearly nanometer widths.
BTW, the stop, buy, and target for this BRFS cipher pattern are: 21.96 23.21 and 24.75, respectively. The second target is about 25.69.
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