As of 01/27/2023
Indus: 33,978 +28.67 +0.1%
Trans: 14,483 +191.14 +1.3%
Utils: 968 +1.08 +0.1%
Nasdaq: 11,622 +109.30 +0.9%
S&P 500: 4,071 +10.13 +0.2%

YTD
+2.5%
+8.1%
+0.0%
+11.0%
+6.0%

34,900 or 33,150 by 02/01/2023
15,100 or 13,500 by 02/01/2023
1,040 or 950 by 02/01/2023
12,400 or 11,000 by 02/15/2023
4,100 or 3,800 by 02/01/2023

As of 01/27/2023
Indus: 33,978 +28.67 +0.1%
Trans: 14,483 +191.14 +1.3%
Utils: 968 +1.08 +0.1%
Nasdaq: 11,622 +109.30 +0.9%
S&P 500: 4,071 +10.13 +0.2%

YTD
+2.5%
+8.1%
+0.0%
+11.0%
+6.0%
 
34,900 or 33,150 by 02/01/2023
15,100 or 13,500 by 02/01/2023
1,040 or 950 by 02/01/2023
12,400 or 11,000 by 02/15/2023
4,100 or 3,800 by 02/01/2023
 
Initial release: 12/29/2021. Added ascending scallops and adjusted the figures as necessary: 12/30/21.
The idea behind pattern pairs is to pick a chart pattern type (like double bottoms) to buy and another to sell (like a headandshoulders top). You buy the upward breakout from the double bottom, hold for a few years, and sell when a headandshoulders top appears and breaks out downward. Along the way, you give price a chance to rise far enough to overcome other pattern pair trades which are stopped out for a loss. This is a trendfollowing strategy.
This article summarizes the average performance of pattern pairs, highlighting the top ten.
Out of 4,081 different pattern pairs, I removed 997 because they had fewer than 30 trades. Statistics from those can be unreliable. That's why you'll see some gaps in the rankings. The statistics below apply to the remaining 3,084 pattern pairs. Commissions, fees, dividends, interest earned on balances waiting to be invested were not included in the totals.
You can download (for your personal use only) an Excel spreadsheet of the summary results.
Table 1: General Statistics for Pattern Pairs  

Category  Win: Average  Loss: Average  Net Profit  Annual Profit  No Stop: Net  Win/Loss Ratio  Expectancy 
Average  167%  13%  39%  17%  92%  29%  $4.48 
Median  142%  12%  32%  15%  83%  28%  $3.53 
The results shown above apply to the results summary spreadsheet (Download Results Spreadsheet (563k, .xlsx file), same as above link), not as a summary of the individual trades. The distinction is an important one.
In my tests, I researched each pattern pair and computed the average performance for the pair. I reported that average on another spreadsheet, which I call the Results Spreadsheet (the same one you can download at the above link). The above table is an average of the data in the Results Spreadsheet. In effect, it's an average of averages. It's not ideal, but I believe it has value. With that in mind, let's look at the results.
The above table shows the average and median values of the various categories for pattern pairs shown in the Results Spreadsheet. The following definitions apply to all tables.
Win: Average. This is the average percentage gain for all pattern pairs which showed a profit. For example, the average gain was 167%. The median win, which is the middle value from a sorted list, was 142%. Half of the average trades did better than this and half did worse.
Net Profit. When you combine the profits and losses from a pattern pair, the average net profit was a gain of 39%.
Annual Profit. This is the net profit annualized. If you held a pattern pair for three years and made 33% (as a fictitious example), that's 11% each year.
No Stop: Net. This is the net profit for trades which did not use a stop loss order.
Win/Loss Ratio. This is how many trades showed a profit, on average.
Expectancy. Expectancy is a way of gauging winning and losing trades and how much money you might make trading a pattern pair. The formula is: Expectancy = (% wins * Average win)  (% losses * Average loss).
Table 2: Largest Winning Trades  

Rank  Buy Pattern  Sell Pattern  Win: Average  Loss: Avg  Net Profit  Annual Profit  Annual Rank  No Stop: Net  Win/Loss Trades  W/L Ratio  Expectancy  Expectancy Rank 
1  Busted rectangle top  Eve & Eve double top  2302%  6%  426%  217%  1  587%  41/178  19%  $21.98  42 
2  Busted rectangle top  Scallop, inverted and ascending  2022%  6%  610%  213%  2  682%  17/39  30%  $29.25  17 
3  Busted rectangle top  Busted 3 rising valleys  1684%  6%  411%  156%  4  506%  40/122  25%  $22.55  35 
4  Busted rectangle top  Busted triple bottom  1484%  5%  395%  163%  3  486%  57/155  27%  $24.76  27 
5  Roof  Busted Eve & Adam double bottom  1326%  6%  127%  80%  13  264%  3/27  10%  $3.10  1683 
6  Diamond top  Busted Eve & Adam double bottom  1125%  7%  189%  86%  11  316%  9/43  17%  $5.60  915 
7  Broadening formation, rightangled and ascending  Scallop, inverted and ascending  1098%  13%  285%  137%  5  356%  15/41  27%  $11.24  248 
8  Roof  Busted Adam & Eve double bottom  1049%  8%  129%  57%  36  320%  4/27  13%  $9.39  366 
9  Busted rectangle top  Eve & Adam double top  1042%  6%  249%  94%  8  387%  59/183  24%  $14.60  144 
10  Busted broadening wedge, descending  Busted Triple bottom  899%  10%  147%  84%  12  165%  10/48  17%  $29.85  16 
Table 2 shows the pattern pairs with the highest percentage gain. The table is sorted on the "Win: Average" column, and includes winning trades only.
The winning pair is to buy a busted rectangle top and sell an Eve & Eve double top. A busted rectangle is a rectangle with a downward breakout. Price drops no more than 10%, reverses and closes above the top of the pattern. If you have a buy stop in place a penny above the top of the rectangle, you may open the trade near the optimum price.
Sell when an Eve & Eve double top confirms when price drops at least a penny below the bottom of the chart pattern.
On the buy side, a busted rectangle top appears most often (five times!).
On the sell side, a busted Eve & Adam double bottom appears twice in the list. Six of ten rows use busted patterns, which is a strong showing.
The average win ("Win: Average") seems outsized and unbelievable. I researched this and found a trade in Amazon stock which lasted 21 years and made 72,000+%. It's possible that someone held onto the stock that long and bought it at the right moment (the breakout from the chart pattern). A review of other trades for that pattern pair found 10 trades from 8 stocks with gains exceeding 1,000%. Another 10 trades showed gains between 100% (a double) and 1,000%. In other words, large gains are not common but they do happen. I chose to leave them in because I've had such large gains in my trading, often holding stocks for many years, too.
Losses ("Loss: Avg") are reasonable but they are averages. The size of the loss will depend (mostly) on the height of the chart pattern. One of the things I've noticed with rectangles, is that the losses are small compared to other, taller, chart patterns. Recall that a stop is set a penny below the bottom of chart patterns, so the taller they are, the larger the potential loss but the less often a stop triggers.
Net profit is about double the size of annual profit, suggesting a hold time of 2 to 3 years.
The "No Stop: Net" is how much you can make, on average, if you do not use a stop loss order. If you're willing to buyandhold for 2 to 3 years, then the rewards can be huge.
One of the big surprises in this table and others is the win/loss ratio ("W/L Ratio") is small. I don't know if this is true or not, but I've heard that trend following strategies commonly have a win/loss ratio in the 40% range.
Expectancy: You can make almost $30 a share per trade (lines 2 and 10) or you can make $3.10 (line 5). Even though the average winning trade is three or four digits (percentage), you have to pick a big winner if only 10% of your trades win (line 5).
Table 3: Smallest Losing Trades  

Rank  Buy Pattern  Sell Pattern  Win: Average  Loss: Avg  Net Profit  Annual Profit  Annual Rank  No Stop: Net  Win/Loss Trades  W/L Ratio  Expectancy  Expectancy Rank 
1  Roof  Busted broadening top  306%  4%  16%  17%  1155  143%  2/28  7%  $3.13  1672 
2  Falling wedge  Busted diamond top  302%  5%  77%  47%  70  128%  15/41  27%  $5.33  987 
3  Busted rectangle top  Broadening wedge, descending  153%  5%  35%  18%  1125  132%  18/54  25%  $3.61  1509 
4  Falling wedge  Busted scallop, descending and inverted  375%  5%  73%  66%  23  124%  8/31  21%  $2.49  1920 
5  Roof  Busted 3 rising valleys  113%  5%  16%  11%  2073  109%  8/38  17%  $0.24  2631 
6  Busted Adam & Adam double top  Busted diamond top  109%  5%  18%  20%  859  63%  7/28  20%  $4.58  1204 
6  Triangle, descending  Busted scallop, inverted and ascending  107%  5%  25%  15%  1437  73%  25/66  27%  $4.02  1386 
8  Busted rectangle top  Busted scallop, descending and inverted  164%  5%  30%  17%  1255  111%  10/38  21%  $1.15  2386 
9  Busted rectangle top  Busted rising wedge  818%  5%  262%  88%  10  318%  12/25  32%  $11.21  249 
10  Roof  Busted Adam & Adam double bottom  132%  5%  10%  8%  2345  161%  6/50  11%  $6.59  715 
Table 3 shows the results sorted by the "Loss: Avg" column. These are the pattern pair trades which lost the smallest amount. The busted rectangle for buying seems to be a favorite (three times in the table). On the sell side, busted patterns are plentiful with a busted Adam & Adam double bottom appearing twice.
Notice that a rank of 6 appears twice. That's not a mistake. Results are a tie for those two lines. You'll also notice that the loss average column shows 5% often. If you expand the number of decimal places, the rank order is correct for what's shown.
Look at line 1, the pattern pair with the smallest average loss. The win/loss ratio is just 7% and only 2 of 28 trades were profitable and yet they made a combined 306%. That's due to big gains from those two winning trades. I'd much prefer trading line 8 with a 32% win/loss ratio.
Table 4: Highest Net Profit  

Rank  Buy Pattern  Sell Pattern  Win: Average  Loss: Avg  Net Profit  Annual Profit  Annual Rank  No Stop: Net  Win/Loss Trades  W/L Ratio  Expectancy  Expectancy Rank 
1  Busted rectangle top  Scallop, inverted and ascending  2022%  6%  610%  213%  2  682%  17/39  30%  $29.25  17 
2  Busted rectangle top  Eve & Eve double top  2302%  6%  426%  217%  1  587%  41/178  19%  $21.98  42 
3  Busted rectangle top  Busted 3 rising valleys  1684%  6%  411%  156%  4  506%  40/122  25%  $22.55  35 
4  Busted rectangle top  Busted triple bottom  1484%  5%  395%  163%  3  486%  57/155  27%  $24.76  27 
5  Broadening formation, rightangled and ascending  Scallop, inverted and ascending  1098%  13%  285%  137%  5  356%  15/41  27%  $11.24  248 
6  Busted rectangle top  Bumpandrun reversal top  844%  6%  275%  100%  6  339%  78/158  33%  $15.08  126 
7  Busted rectangle top  Busted rising wedge  818%  5%  262%  88%  10  318%  12/25  32%  $11.21  249 
8  Busted rectangle top  Eve & Adam double top  1042%  6%  249%  94%  8  387%  59/183  24%  $14.60  144 
9  Busted broadening wedge, ascending  Busted triangle, symmetrical  688%  10%  243%  98%  7  261%  28/49  36%  $5.27  1001 
10  Rectangle bottom  Busted Diamond bottom  711%  7%  232%  56%  43  374%  11/22  33%  $18.19  75 
Table 4 ranks the results by the highest net profit. Busted rectangle tops appear often as a buy pattern. There's no consistent sell pattern except to say that half are busted ones.
The number of trades has climbed dramatically, suggesting the statistics are more reliable. The win/loss ratio is higher than in other tables, too.
Table 5: Highest Annualized Net Profit  

Rank  Buy Pattern  Sell Pattern  Win: Average  Loss: Avg  Net Profit  Annual Profit  Annual Rank  No Stop: Net  Win/Loss Trades  W/L Ratio  Expectancy  Expectancy Rank 
1  Busted rectangle top  Eve & Eve double top  2302%  6%  426%  217%  1  587%  41/178  19%  $21.98  42 
2  Busted rectangle top  Scallop, inverted and ascending  2022%  6%  610%  213%  2  682%  17/39  30%  $29.25  17 
3  Busted rectangle top  Busted triple bottom  1484%  5%  395%  163%  3  486%  57/155  27%  $24.76  27 
4  Busted rectangle top  Busted 3 rising valleys  1684%  6%  411%  156%  4  506%  40/122  25%  $22.55  35 
5  Broadening formation, rightangled and ascending  Scallop, inverted and ascending  1098%  13%  285%  137%  5  356%  15/41  27%  $11.24  248 
6  Busted ascending scallop  Eve & Eve double top  858%  13%  186%  108%  6  239%  13/44  23%  $62.92  3 
7  Busted rectangle top  Bumpandrun reversal top  844%  6%  275%  100%  7  339%  78/158  33%  $15.08  126 
8  Busted broadening wedge, ascending  Busted triangle, symmetrical  688%  10%  243%  98%  8  261%  28/49  36%  $5.27  1001 
9  Busted rectangle top  Eve & Adam double top  1042%  6%  249%  94%  9  387%  59/183  24%  $14.60  144 
10  Rectangle top  Busted roof, inverted  547%  10%  161%  92%  10  214%  15/34  31%  $15.77  114 
Table 5 sorts the results by the highest annualized net profit. This is different from the prior table because it sorts the numbers according to results per year. If you have a trade which makes 25% in half a year, that's a 50% annualized return (not counting dividends). A trade making 25% in two years drops the annual gain to 12.5%. As I mentioned before, the net profit is often between 2 and 3 times higher than the annual rate, suggesting a 2 to 3 year hold time. That makes sense. It's going to take time to make large gains.
Table 6: Trades with No Stop Loss Order: Net Profit  

Rank  Buy Pattern  Sell Pattern  Win: Average  Loss: Avg  Net Profit  Annual Profit  Annual Rank  No Stop: Net  Win/Loss Trades  W/L Ratio  Expectancy  Expectancy Rank 
1  Busted rectangle top  Scallop, inverted and ascending  2022%  6%  610%  213%  2  682%  17/39  30%  $29.25  17 
2  Busted rectangle top  Eve & Eve double top  2302%  6%  426%  217%  1  587%  41/178  19%  $21.98  42 
3  Busted rectangle top  Busted 3 rising valleys  1684%  6%  411%  156%  4  506%  40/122  25%  $22.55  35 
4  Busted rectangle top  Busted triple bottom  1484%  5%  395%  163%  3  486%  57/155  27%  $24.76  27 
5  Busted triple top  Busted broadening bottom  213%  9%  39%  16%  1264  446%  22/81  21%  $7.46  562 
6  Busted rectangle top  Eve & Adam double top  1042%  6%  249%  94%  8  387%  59/183  24%  $14.60  144 
7  Rectangle bottom  Busted diamond bottom  711%  7%  232%  56%  43  374%  11/22  33%  $18.19  75 
8  Broadening formation, rightangled and ascending  Scallop, inverted and ascending  1098%  13%  285%  137%  5  356%  15/41  27%  $11.24  248 
9  Busted rectangle top  Bumpandrun reversal top  844%  6%  275%  100%  6  339%  78/158  33%  $15.08  126 
10  Bumpandrun reversal bottom  Busted broadening bottom  284%  25%  116%  32%  236  328%  42/54  44%  $13.46  173 
Table 6 sorts the table by how well pattern pairs perform when a stop loss order is not used. Busted patterns appear 7 times as buy patterns and 5 times as sell patterns. Hold times appear to be closer to 3 years than 2. The average win seems outsized probably due to large gains from a few stocks. Losses are contained except for line 10, at 25%. Ouch! Samples sizes are good. Expectancy is good. I'm feeling good, too.
Table 7: Highest Win/Loss Ratio  

Rank  Buy Pattern  Sell Pattern  Win: Average  Loss: Avg  Net Profit  Annual Profit  Annual Rank  No Stop: Net  Win/Loss Trades  W/L Ratio  Expectancy  Expectancy Rank 
1  Ugly double bottom  Busted scallop, inverted and ascending  177%  18%  121%  23%  624  147%  35/14  71%  $21.05  49 
2  Round bottom  Busted diamond bottom  153%  22%  91%  20%  843  121%  24/13  65%  $9.08  385 
3  Rounding top  Diamond bottom  162%  25%  95%  20%  909  145%  25/14  64%  $10.10  321 
4  Round bottom  Busted scallop, descending and inverted  139%  24%  79%  18%  1117  101%  38/22  63%  $11.91  215 
5  Round bottom  Bumpandrun reversal top  154%  24%  86%  33%  219  112%  323/200  62%  $10.35  305 
6  Ugly double bottom  Broadening formation, rightangled and descending  103%  8%  60%  22%  715  64%  27/17  61%  $17.19  90 
7  Round bottom  Ascending scallop  130%  27%  68%  25%  462  86%  70/46  60%  $5.49  951 
8  Busted 3 falling peaks  Busted roof  132%  18%  72%  22%  708  107%  18/12  60%  $20.25  54 
9  Round bottom  Diamond top  168%  23%  90%  29%  333  137%  82/56  59%  $9.86  336 
10  Rounding top  Diamond top  153%  22%  78%  28%  383  108%  54/40  57%  $8.30  463 
If you want to win more often, Table 7 shows the results sorted by the highest win/loss ratio.
Losses are big, over 20% but annual profit is good. Trades are few except for line 5, with 523 (323 winners and 200 losers). For that line the average win is 154% but you have to tolerate an average loss of 24%.
Table 8: Highest Expectancy  

Rank  Buy Pattern  Sell Pattern  Win: Average  Loss: Avg  Net Profit  Annual Profit  Annual Rank  No Stop: Net  Win/Loss Trades  W/L Ratio  Expectancy  Expectancy Rank 
1  Busted ascending scallop  Busted triple bottom  816%  14%  193%  80%  14  313%  12/36  25%  $68.35  1 
2  Busted ascending scallop  Busted 3 rising valleys  795%  12%  189%  79%  16  224%  10/30  25%  $64.38  2 
3  Busted ascending scallop  Eve & Eve double top  858%  13%  186%  108%  6  239%  13/44  23%  $62.92  3 
4  3 rising valleys  Busted Adam & Eve double bottom  559%  24%  154%  40%  127  220%  130/295  31%  $47.08  4 
5  Scallop, inverted and ascending  Busted Adam & Eve double bottom  286%  20%  74%  20%  886  193%  112/253  31%  $40.28  5 
6  Busted ascending scallop  Eve & Adam double top  449%  13%  147%  67%  25  253%  17/32  35%  $39.67  6 
7  Rectangle bottom  Busted Adam & Eve double bottom  637%  10%  158%  49%  69  251%  33/94  26%  $36.70  7 
8  Busted broadening wedge, descending  Eve & Eve double top  609%  11%  172%  79%  16  236%  18/43  30%  $36.08  8 
9  3 rising valleys  Eve & Eve double top  437%  25%  164%  48%  74  225%  679/980  41%  $34.38  9 
10  Descending scallop  Busted scallop, inverted and ascending  144%  17%  36%  15%  1566  101%  44/88  33%  $33.86  10 
Table 8 shows the results sorted by the expectancy column.
Four ascending scallops and two 3 rising valleys appears in the buy column. Busted patterns are plentiful for selling (8 times in the table).
 Thomas Bulkowski
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