Trading close-to-close patterns
by Toby Crabel
Do the relationships between day-to-day closing prices predict the next day's price moves and, if so, is
it possible to isolate these profitable chart patterns and incorporate them as entry signals in a larger
trading system? In pursuit of these answers, I have tested all two- through five-day close-to-close patterns
in the T-bond futures market from 1978 to 1987 (Figure 1) and discovered the beginnings of some
excellent low-risk entry techniques. My tests assumed that trades were entered on the last close of the
pattern and exited on the next day's close. Stops were not used.
Figure 2 is an example of the --++ pattern listed as number 24 in Figure 1. The pattern is two lower
closings followed by two higher closings, all relative to the close immediately preceding it. Figure 1
shows this pattern is most profitable as a sale. Entry is taken on the close of the last day which, in this
case, is higher and the trade is exited on the next day's close.