Chart pattern breakdown/retrace strategy
● Pairs: US30, S&P, Gold tested so far. Doesn’t work on Nasdaq
● Timeframe: 15m chart. NY session only tested so far (suspect gold works in other
sessions too though), entries valid between 9:30 - 1pm ET.
Breakout confirmation defined: Breakout defined as two consecutive red (green) candles
closing below (above) trendline on a breakout or a strong thrust candle closes near low (high)
of the candle and following candle after it also closes below (above) wedge.
Measured move defined: Take the vertical distance from the start of the 2nd trendline forming
the wedge to the other trendline and place it where the retest occurs (you’ll see orange lines in
my charts for these measured moves). Generally don’t take any trades where the TP in order to
get 2R+ is significantly beyond the measured move, but in practice, if 2R TP is reasonably close
enough to the full measured move (i.e. the final 0.3R or less is past the measured move) it’s fine
to take.
Entry #1: breakout confirmation followed by retest. Enter on the retest.
SL for Entry #1: just past 2 lines of defense (order block body, FVG, or high/low pivots). If price
is testing an order block or FVG during retest, that one does not count towards the 2 lines of
defense. *In the video I talk about using a more aggressive SL for US30, but now that I’ve gotten
better at understanding optimizations, it’s best to keep the same ‘2 lines of defense’ stop loss
for US30 too.
TP for Entry #1: first 15m order block or FVG (usually use the midpoint of either) that gets you
2R+; should be prior or close to the full measured move.
*Ok to mkt enter at 9:30ET if the 9:15 ET candle pierces back into the pattern on the 1st retest
(not 2nd or 3rd retest) and hasn’t taken out 2 lines of defense yet. Set TP off regular retest target,
Entry #2: mkt entry on strong breakout candle 9:15 - 10:00 ET (candle close at 9:30, 9:45, or 10
ET). Needs to be an obvious breakout with candle close near the extreme of the move (wick
can’t be more than 25% the size of the breakout candle’s body). If not 2R using mkt entry can
wait for retest with the same SL and TP if that provides 2R+.
SL for Entry #2: conservative: high/low wick of either mkt open 9:30 candle or 9:15 candle if
going off of that one. aggressive: just past the open of the mkt open 9:30 candle or 9:15 candle
(ignore wicks)
TP for Entry #2: first 15m order block or FVG (usually use the midpoint of either) that gets you
2R+; should be prior or close to the full measured move.
*For entry #2, if the first retest for a pattern is beyond the wedge extreme high/low followed by
an engulfing candle, can take with same parameters as entry #2 tp/sl. Doesn’t happen too often
though.
Entry #3: mkt entry at 9:30 ET after a recent retest. Price action needs to have recently retested
the pattern during london session or pre-market NY session.
SL for Entry #3: conservative: normal 1-2 lines of defense on original retest, aggressive: just
past the wick of the prior retest.
TP for Entry #3: first 15m order block or FVG (usually use the midpoint of either) that gets you
2R+; should be prior or close to the full measured move.
Other rules:
● If there is news pre-market the next day and hasn't hit TP or SL, close by 4pm ET.
● close any positions prior to high impact red folder US news. (with additional
backtesting, seems like some news events around 10am ET are not that volatile and
could hold trades through those, but I haven’t been able to backtest to confirm yet).
● (optional) close any open trades before the weekend.
● all trades must give 2R+ minimum
● wedges, channels, and ascending/descending triangles all used, but 95%+ were
wedges. If it's just barely expansive it usually works but has to be at least close to a
channel at minimum (not 2 trend lines that are super expansive)
● (optional) if the price gets close to TP you can close a bit early but only ~5% trades
came back on me after being in decent profits so for the most part you shouldn't
need to do any trade management.
● If breakout is too big (i.e. taking local liquidity), move likely already happened and
pass on any retests.
● any retests past the extremes of the wedge you can't trade since you don't have any
lines of defense to put stops off of (only exception is for entry #2; see * note below
entry #2).
● breakouts must be in line with expected moves i.e. only breakdowns from rising
wedges
● if a trade is still valid after a news candle, can still take it as long as one of the 3 entry
setup parameters are still valid.
● if price has a fake out (unconfirmed breakout that snaps back into the wedge) during
the NY session and the pattern is still a wedge if you adjust the trendline to that new
high/low, do that instead of leaving it how you initially drew it.
Backtesting results:
4yr US30 results (could also test YM on futures) starting with 100k acct, risk 1k per trade (1%):
4yr Gold (could also test GC on futures):
1yr SPX500 results (ES on futures): *If I were to trade it again; i would stick to US30 and gold,
rather than also trading SPX500 which is very highly correlated with US30. Oil or natural gas
could be another possible uncorrelated asset to test as well.
Detailed trades & analytics of the backtests (times in MT; 2hrs behind ET):
[Link]
usp=sharing&ouid=115310930517112223399&rtpof=true&sd=true
Forward testing results:
Forward tested from late October 2023 through mid February 2024, yielded 66.5R and 62% win rate
between all 3 pairs (using more aggressive SL for US30)*
[Link]
usp=sharing&ouid=115310930517112223399&rtpof=true&sd=true
Tradingview layouts I used in the past to visualize the forward testing trades above (you will need to
use TV’s replay feature to go back far enough to see them like Nov 2023 - Jan 2024).
US30: [Link]
XAUUSD: [Link]
SPX500: [Link]
*In the video I talk about using a more aggressive SL for US30, but now that I’ve gotten better at
understanding optimizations, it’s best to keep the same ‘2 lines of defense’ stop loss for US30 too