Learn the 14 Leading Chart Patterns in Algorithmic Trading
Discover how to identify and utilize the 14 leading chart patterns in algorithmic trading to enhance your trading strategies and maximize profitability. Master the art of pattern recognition and ta...
ALGORITHMIC TRADING.
2/7/20244 min read
Double Tops & Bottoms
Double Tops and Bottoms are reversal patterns identified on price charts. They signal potential trend reversals after an established uptrend (Double Top) or downtrend (Double Bottom).
Trading Strategy
Confirmation Entry: Algorithmic traders may enter short positions when a Double Top is confirmed and long positions when a Double Bottom is confirmed. Confirmation often involves a break below or above the pattern's neckline.
Adam & Eve Double Tops & Bottoms
Adam & Eve Double Tops and Bottoms are variations of the traditional patterns, indicating a smoother, rounded formation.
Trading Strategy
Confirmation Entry: Similar to Double Tops & Bottoms, algorithmic traders may enter positions upon confirmation, with attention to the rounded and smoother characteristics of the pattern.
Rectangles
Rectangles are consolidation patterns, indicating a period of price consolidation before the prevailing trend resumes.
Trading Strategy
Breakout Entry: Algorithmic traders may enter positions when the price breaks out of the rectangle pattern, expecting a continuation of the trend.
Triple Tops & Bottoms
Triple Tops and Bottoms are variations of Double Tops & Bottoms, indicating further resistance or support levels.
Trading Strategy
Confirmation Entry: Algorithmic traders may enter positions upon confirmation, considering the triple nature of the pattern.
Triangles (Descending and Ascending)
Triangles are continuation patterns that suggest a temporary consolidation before the prevailing trend resumes.
Trading Strategy
Breakout Entry: Algorithmic traders may enter positions when the price breaks out of the triangle pattern, anticipating a continuation of the trend.
Broadening Patterns
Broadening Patterns are characterized by expanding price ranges, indicating increased volatility.
Trading Strategy
Volatility Breakout Entry: Algorithmic traders may enter positions when the price breaks out of the broadening pattern, capitalizing on increased volatility.
Diamond Tops
Diamond Tops are reversal patterns forming a diamond shape, signaling potential trend changes.
Trading Strategy
Confirmation Entry: Algorithmic traders may enter positions when the price breaks below the diamond pattern's support, indicating a potential trend reversal.
Wedges
Wedges are consolidation patterns that resemble triangles but have converging trendlines.
Trading Strategy
Breakout Entry: Algorithmic traders may enter positions when the price breaks out of the wedge pattern, expecting a continuation of the trend.
Rounded Tops & Bottoms
Rounded Tops and Bottoms are characterized by smooth, rounded shapes, indicating a gradual reversal.
Trading Strategy
Confirmation Entry: Algorithmic traders may enter positions upon confirmation, considering the rounded nature of the pattern.
Head & Shoulders
Head & Shoulders is a reversal pattern that signals the end of an uptrend.
Trading Strategy
Breakout Entry: Algorithmic traders may enter short positions when the price breaks below the pattern's neckline, confirming the reversal.
Inverse Head & Shoulders
Inverse Head & Shoulders is a reversal pattern that signals the end of a downtrend.
Trading Strategy
Breakout Entry: Algorithmic traders may enter long positions when the price breaks above the pattern's neckline, confirming the reversal.
Flags
Flags are short-term continuation patterns that signal a brief consolidation before the prevailing trend resumes.
Trading Strategy
Breakout Entry: Algorithmic traders may enter positions when the price breaks out of the flag pattern, anticipating a continuation of the trend.
Pennants
Pennants are small symmetrical triangles that form after strong price movements, indicating a brief consolidation.
Trading Strategy
Breakout Entry: Algorithmic traders may enter positions when the price breaks out of the pennant pattern, expecting a continuation of the trend.
Conclusion
Algorithmic trading patterns offer systematic approaches to identify potential trading opportunities in financial markets. Traders use these patterns to automate decision-making processes, leveraging historical data and real-time analysis.
It's essential for algorithmic traders to thoroughly backtest their models, considering market conditions, transaction costs, and risk management. Additionally, continuous monitoring and adaptation of algorithms are crucial to ensure their effectiveness in dynamic market environments.
Successful algorithmic trading often involves a combination of these patterns and continuous refinement to adapt to evolving market conditions.
Francisco F. De Troya
Algorithmic trading & derivatives professional.
Executive Chairman, Blockmas


























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Entity
Blockmas Algorithmic Defi Group LTD is a British entity with registration number 15330972 and located at 128 City Road, London, EC1V 2NX, in the United Kingdom. Blockmas™ is a registered trademark owned by Blockmas Algorithmic Defi Group Ltd -the exclusive entity with full legal authority to manage the Blockmas™ brand. Stop trading. Invest in Trading Systems, Trade Everything, and Algorithmic Trading For Everyone are registered trademarks. All the content in this website is fully copyrighted, and unless a written allowance from our side is issued, it is completely forbidden to distribute it.
Services
Blockmas is not offering investment management, investment advice, or financial intermediation services neither in OTC (Over-The-Counter) derivatives, ETDs (Exchange-Traded Derivatives) or blockchain assets (synthetic tokens or perpetual future contracts). We never manage or hold our client's funds. Instead, we connect our clients with highly regulated financial institutions under an IB agreement. We are exclusively a technology company. Our algorithmic investment solutions connect our clients to third-party PAMM/MAM accounts offered by third-party regulated brokers and other copytrading solutions. Client's funds are always under their control and investors copy the strategies of other traders or investment firms. If any questions, you can contact our Compliance Department at compliance@blockmas.com.
CFDs risk warning
CFDs Are Complex Instruments And Come With A High Risk Of Losing Money Rapidly Due To Leverage. 75% Of Retail Investor Accounts Lose Money When Trading CFDs With The Providers We Introduce. You Should Consider Whether You Understand How CFDs, FX Or Any Of Our Other Products Work And Whether You Can Afford To Take The High Risk Of Losing Your Money. Trading In The Products And Services Of Brokers May, Even If Made In Accordance With A Recommendation, Result In Losses As Well As Profits. Trading Risks Are Magnified By Leverage – Losses Can Exceed Your Deposits. Margin Calls May Be Made Quickly Or Frequently, Especially In Times Of High Volatility, And If You Cannot Meet Them, Your Positions May Be Closed Out And Any Shortfall Will Be Borne By You. Values May Fluctuate Significantly In Times Of High Volatility Or Market /Economic Uncertainty; Such Swings Are Even More Significant If Your Positions Are Leveraged And May Also Adversely Affect Your Position. Trade Only After You Have Acknowledged And Accepted The Risks. You Should Carefully Consider Whether Trading In Leveraged Products Is Appropriate For You Based On Your Financial Circumstances And Seek Independent Financial Consultation. If any questions, you can contact our Compliance Department at compliance@blockmas.com.
ETDs risk warning
Transactions in securities futures, commodity and index futures and options on futures carry a high degree of risk. The amount of initial margin is small relative to the value of the futures contract, meaning that transactions are heavily "leveraged" A relatively small market movement will have a proportionately larger impact on the funds you have deposited or will have to deposit: this may work against you as well as for you.
Jurisdictions warning
Blockmas, a technology company only offering introducing brokerage services, does not offer investment management, investment consulting, or other related financial services. Nevertheless, we do operate exclusively in the jurisdictions in which our introducing brokerage services are allowed, and we are in constant monitoring and contact with different regulatory authorities to ensure the compliance of our products. If any questions, you can contact our Compliance Department at compliance@blockmas.com.
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