Pattern Strategy: Mastering the Ivanovitch Momentum System (IMS)
In this article, we’ll explore the Pattern Strategy using the Ivanovitch Momentum System (IMS). Patterns are essential in identifying market trends, both bullish and bearish, and this strategy helps you spot the most successful patterns to improve your trading decisions. We’ll cover how to use the success rates of patterns, timeframes, and market trends to maximize your trades.
Understanding the Pattern Strategy
The Advanced Strategy follows the same core idea as the Simple Strategy: taking trades based on strong long and strong short signals generated by the IMS indicator. However, the advanced approach introduces multiple trades at various points in the trend to maximize potential profits.
Key Features of Patterns in IMS
Patterns in the IMS system provide:
- Bullish Patterns: Indicate potential upward market movements.
- Bearish Patterns: Signal potential downward market trends.
- Success Rates: Displayed for each pattern to show how often they have led to profitable trades in a given time period.
You can view how many times each pattern appeared over the last set of candles (by default, set to 5000 candles). This gives you a clear overview of the pattern’s reliability.
Entry Conditions
The Pattern Strategy relies on the success rate of patterns to determine the best time to enter a trade:
- Bullish Patterns: When a bullish pattern, such as a Bullish Harami, appears with a high success rate, enter a buy position.
- Bearish Patterns: When a bearish pattern, like a Bearish Engulfing, shows up, consider entering a sell position.
You should prioritize patterns that have a higher success rate based on the historical data from the IMS indicator. For example, a pattern with a 100% success rate that has appeared several times is more reliable than one with a lower success rate.
Stop-Loss (SL) Setup
Stop-loss placement remains crucial when trading with patterns:
- For bullish trades, place the stop-loss below the recent low.
- For bearish trades, place the stop-loss above the recent high.
The key is to adjust the stop-loss based on the pattern’s expected movement, ensuring you’re protected if the trade moves against you.
Take-Profit (TP) Setup
There are two primary ways to set up your take-profit:
- Fixed Take-Profit: Aim for a fixed take-profit based on the pattern’s expected movement. This is ideal for patterns with a high success rate.
- Exit on Opposite Pattern: You can also exit a trade when the opposite pattern appears (e.g., exiting a bullish trade when a bearish pattern forms).
By closely monitoring patterns, you can adapt your take-profit to the market’s behavior.
Exit Conditions
Exiting trades in the Pattern Strategy is all about identifying opposite patterns or hitting your pre-set take-profit levels:
- Exit on Pattern Success: Close your trade when your take-profit is hit or when the market confirms the pattern’s direction.
- Exit on Opposite Pattern: If an opposite pattern (e.g., bearish after bullish) appears, it’s time to close the trade.
Keeping an eye on the success rates of patterns helps you decide whether to continue holding a position or exit early.
Symbols and Timeframes
The Pattern Strategy works across various symbols and timeframes, though it’s most effective on shorter timeframes where patterns emerge more frequently.
Suggested symbols:
- XAU/USD
- Major forex pairs
- Indices with strong trend characteristics
Suggested timeframes:
- 1-minute to 30-minute charts work best, as they provide more frequent pattern signals, allowing you to make quicker decisions.
Trade Example: A Step-by-Step Guide
1. Identify the Pattern: You notice a Bullish Harami with a 100% success rate on the 15-minute chart.
2. Enter the Trade: Open a buy position based on the bullish pattern.
3. Set Your Stop-Loss: Place the stop-loss below the recent low.
4. Monitor the Success Rate: Continue watching the pattern’s success rate. If it remains strong, hold the trade.
5. Exit Based on Opposite Pattern: If a Bearish Engulfing pattern (with a high success rate) appears, close the position and consider opening a sell position.
Key Tips for Success
• Watch the Success Rates: Only trade patterns that have a high success rate—this increases your chances of making profitable trades.
• Adjust for Timeframes: Patterns work best on shorter timeframes (1–30 minutes), as they offer more data for the IMS indicator to analyze.
• Take Notes: Keep track of which patterns work best on specific symbols and timeframes. This will help refine your trading strategy over time.
Summary Table
| Aspect | Details |
|---|---|
| Entry Signal | Bullish or bearish pattern (e.g., Bullish Harami, Bearish Engulfing) |
| Stop-Loss Setup | Below recent low (bullish) or above recent high (bearish) |
| Take-Profit Setup | Fixed take-profit based on expected pattern movement or exit on opposite pattern |
| Exit Conditions | Exit when take-profit is hit or when opposite pattern appears |
| Recommended Symbols | XAU/USD, major forex pairs, trending indices |
| Recommended Timeframes | 1-minute to 30-minute charts |
| Strategy Strength | Best when trading based on patterns with high success rates |