Using Patterns Creatively on Technical Indicators. A Python Study.

What if we Use Pattern Recognition Algorithms on Technical Indicators?

Sofien Kaabar, CFA
The Startup
Published in
11 min readNov 20, 2020

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As we know, pattern recognition is the search and identification of recurring patterns with approximately similar outcomes. When used on prices, we get some good results on some strategies and some bad results on others. Our job now is to be creative and expand our research horizon. In this article, we will back-test a pattern that I have found after a lot of research, but this time, we will not apply the pattern on the assets’ prices, rather on technical indicators, specifically, the Relative Strength Index — RSI. Why is this?

We want to see whether pattern recognition works well on price-derived indicators or not, and from there we want to see if we get quality trading signals or not. But first, let us quickly go through the Astral pattern and the RSI so that we know where we stand. Get your Python fingers ready!

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The Astral Pattern

Being fascinated with the Fibonacci sequence, I have developed this pattern to be both a combination of time and the sequence. Surely, it is not meant to be a strategy on its own but I would like to think that it has its place within the trading framework. For example, a technical trader relying on graphical analysis and the MACD indicator can use the Astral pattern to time the trades and add convictions.

It is a Fibonacci-based timing pattern that relies on certain conditions to be fulfilled before giving a correction signal. By correction signal I mean a certain market reaction when the signal is generated, thus, it is common to see a small consolidation but a little rare to see a full reversal. For more on other Technical Trading Patterns, feel free to…

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Sofien Kaabar, CFA
The Startup

Top writer in Finance, Investing, Business | Trader & Author | Bookstore: https://sofienkaabar.myshopify.com/