What are Strat Patterns?
The Strat Patterns are unique configurations of price bar sequences that try to provide insights into trend trajectories, prospective market flip-flops, and tactical trading entry points. These patterns are instrumental in trading strategies that try to engage multiple timeframes.
Rob Smith is the brain behind the development of the Strat Patterns trading method, trying to capitalize on the dynamic nature of price action. Smith’s technique tries to draw upon the cyclical pattern of expansion and contraction inherent in waves, a naturally occurring phenomenon. Utilizing this approach in the trading sphere, he tried to manage to design a potential trading setup that synergistically tries to combine multiple timeframes and other overlapping factors.
Rob Smith tried to harness the principles of nature to predict market trends, assigning numerical values to candlestick formations on trading charts. Through this method, he tried to manage to formulate combinations that yield potential trading scenarios.
Candlestick types
The Strat strategy mainly revolves around three core candlestick types:
- Inside Candlestick: This candlestick tries to materialize within the range of its predecessor, symbolizing market indecision.
- Trending Candlestick: This type of candlestick tries to illustrate bullish or bearish trends. A closing higher than the opening signifies a bullish trend, whereas a bearish trend occurs when the closing is lower than the opening. Notably, the candlestick’s body is significantly larger than the wicks.
- Outside Bar Candlestick: This candlestick tries to surpass the high and low of the previous one, completely engulfing it. It represents broadening formation and foretells a major trend reversal.
Strat Patterns
These patterns are classified into two groups, anchored on the three candlestick types.
- In Force Patterns: These patterns predict the current market trend, trying to indicate whether the price is likely to ascend or descend. These predictions are utilized for trading in shorter timeframes.
- Actionable Patterns: These patterns try to provide critical data on entry and target levels, trying to enable the setting up of trades, incorporating stop loss and taking profit levels. They play a crucial role in the trading strategy.
Multiple Timeframe Analysis
Multiple Timeframe Analysis in Strat Patterns Rob Smith states that when the analysis of two higher timeframes converges with the current timeframe, the odds of a potential trade setup increase.
The Strat leverages multiple timeframes for trading, including:
- Tides: Represented by Monthly and Weekly charts.
- Waves: Depicted through Daily charts.
- Ripples: Seen in Hourly and lower timeframe charts.
In multi-timeframe analysis, the strat patterns in the same direction, whether bullish or bearish, are checked. If all patterns align, it’s referred to as “going with the flow”.
Illustration
Suppose a bullish 2-2 continuation pattern forms on the monthly chart. This tries to indicate a bullish trend with prices achieving higher highs on the monthly chart. Similarly, on the weekly chart, a 2-2 pattern forms, showing a bullish trend.
Now, if a bullish 3-1-2 reversal pattern forms on the daily chart, the direction of all timeframes is aligning towards bullishness. So, a long position is placed on the breakout of the inside bar or the #1 candlestick, creating a potential trade setup.
Purpose of Strat Patterns
Strat patterns try to aid traders in aligning their strategies with institutional traders or large banks, a fundamental prerequisite for potential opportunities in technical analysis trading strategy. Traders that go against these large players tend to incur drawdowns. These patterns try to allow traders to emulate big market players and natural concepts that are potentially reliable.
The application of multi-timeframe analysis tries to help discern the direction of major market players. Meanwhile, Strat patterns try to assist in pinpointing potential trade setups with precise entry and target levels.
The Strat Patterns Trading Strategy
A comprehensive trading strategy tries to incorporate entry price and target price. However, the first step is aligning timeframes. Once the timeframes align, you should only try to trade those strat patterns that project in the direction of the higher timeframe trends.
Executing a Trade
Open a buy trade on the break of the inside bar in bullish patterns, while a sell trade should be initiated below the low of the inside bar or the #2 candlestick.
Final Thoughts
In conclusion, the Strat Patterns try to provide a comprehensive, nature-inspired approach to forex trading, founded by Rob Smith. Using three primary candlestick types – Inside, Trending, and Outside Bar candlesticks – these patterns try to offer insights into market trends, upcoming reversals, and potential trades.
The patterns are divided into ‘In Force’ and ‘Actionable’ categories. The former tries to offer insight into the current market direction, while the latter tries to provide entry and target levels, serving as a key component of any trading strategy.
What sets The Strat Patterns apart is their incorporation of multiple timeframe analysis. With the alignment of two higher timeframes and the current one, traders can significantly try to boost the potential rate of their setups. The approach, described as ‘going with the flow’, consists of three primary timeframes: Tides (Monthly and Weekly charts), Waves (Daily charts), and Ripples (Hourly and lower Time Frame charts).
In the dynamic forex market, Strat Patterns try to serve as a reliable guide. They not only try to help traders align with large institutional traders or big banks – a crucial factor in profitable trading – but also simplify the complex process of try identifying potential trade setups with precise entry and exit price levels.
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