A Week in Pattern Recognition

We’ve started beta testing our pattern recognition software with a small group of traders.  So far the feedback is amazing.  Here is a look at the reports we published each night before trading and the actual trade that occurred the following session.  We actually publish three reports each night and depending on overnight trading two of the reports are discarded.  I’ve only included the applicable report for each day for simplicity purposes.

The analysis is of the S&P 500 futures.  Remember, we’re not trying to get every twist and turn correct, but rather we highlight a couple of high probability situations per week.  The data is difficult to read and interpret at first, but once you know what to watch for it’s easy.  The top curve is always the most dominant pattern in the database.  A couple key elements to look for:

  • Identify the portions where the two curves are in agreement
  • Identify the steepest angles in the curve
  • Notice if both curves closed higher or lower or if they’re split (directional agreement is better)
  • Observe the general shape of the curve

This deep quantitative analysis mixed with art interpretation.  Look at the following curves through the lens of these four points and spot your trades.

Notice that you couldn’t fade Thursday by those rules — but you could sell the open on Friday.  Would knowing that have kept you out of some trouble this week?

Note: The arrows were added by me to emphasize what I interpreted as high probability times and directions.  They were included with the report emailed to the beta testers.  This wee was not the best week that the software has performed, but I’m showing this week because it was a super hard week to trade.  If you have any questions send me a message through the contact tab.

Monday February 13, 2012

Report:

 

Actual:

Tuesday February 14, 2012

Commentary:

This is one of those rare occasions where there is literally nothing actionable.  When in doubt, don’t do anything.  You can see the report here and the actual trade here.

 

Wednesday February 15, 2012

Commentary:

This is another occasion where there is nothing actionable.  When in doubt, don’t do anything.  You can see the report here and the actual trade here.

Thursday February 16, 2012

Report:

Actual:

Friday February 17, 2012

Report:

Actual:

 


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