Читать книгу Encyclopedia of Chart Patterns - Thomas N. Bulkowski - Страница 21

It appears at AB, two valleys that bottom near the same price. A buy signal occurs when price closes above the top of the pattern. The top of the pattern is at C and the entry signal (breakout) happens at D when price closes above the top of the double bottom. Entry is made the next day using the opening price, which is 17.06.

Let's say you're using traditional software and place a stop‐loss order a penny below the low price of B, which is 15.70.

Figure I.1 A double bottom signals a trade entry at D and an exit at the ultimate high. A head‐and‐shoulders top signals an entry at I and an exit at the ultimate low.

The computer watches the stock rise to E and then drop. When it touches the stop‐loss order at 15.70, which happens at F, it closes out the trade. So this trade entered at 17.06, sold at 15.70, and took a loss of $1.36 a share.

Does this mean the double bottom lost $1.36 a share? No. It means the stop‐loss order lost that much. You tested the stop‐loss order, not the double bottom.

What do I mean?

Pretend that when price climbed to E, you raised the stop‐loss order to 17.43 (which is the high price of G). When price dropped to 17.43, the stock sold and it handed you a gain this time of 37 cents a share. Did the double bottom make a profit? No. The stop‐loss order did.

As you move the stop‐loss order around, you get different sell prices. You're not testing the double bottom. You're testing how well the stop‐loss order works at different values. So we haven't answered the basic question, “how do you test chart patterns?”

Given the same entry signal (17.06), let's say you traded this stock perfectly. Where would you sell? When price slides below F, you'll be taking a loss if you have to sell, so trying to shoot for 19 on the upper right of the chart isn't optimum. The trade goes negative for a while before it shows a profit.