Advanced Pattern Recognition for Trading — Part II
Creating a Pattern Recognition Trading Strategy in TradingView
--
Pattern recognition is always an exciting field when it comes to financial research and trading. This article discusses a patterns-based strategy applied on a famous technical indicator.
The Fibonacci Trading Book is finally out! Filled with Fibonacci-based trading methods (tools, indicators, patterns, and strategies), this book will guide you through improving your trading and analysis by incorporating an important technical analysis approach that is Fibonacci [PDF Version available, see end of article).
The 13–5 Pattern
Pattern can come in all shapes in forms, from price patterns to volume patterns and even timing patterns. The 13–5 is a simple pattern that relies on successive conditions on different variables to be realized (it is the same as the 8–3 pattern discussed in a previous article). The following are the conditions for the 13–5 pattern:
- A buy pattern occurs after thirteen successive close prices where each close price is lower than the close price five periods ago.
- A sell pattern occurs after thirteen successive close prices where each close price is higher than the close price five periods ago.
The strategy takes the 13–5 a bit further and applies the conditions on the RSI with an extra step.
Creating and Coding the Strategy
The strategy has the following rules:
- For a long signal, the RSI must shape a 13–5 pattern with the last value below 30.
- For a short signal, the RSI must shape a 13–5 pattern with the last value above 70.
The following Figure shows the signal chart on EURUSD:
