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Whale Trading

Pattern-Based Strategy Overview: Connecting S/R and Patterns with Trend and Mean Reversion

In this section, we focus on pattern-based strategies.

We assume you have already gone through
S/R,
Patterns, Candle Patterns, Chart Patterns,
Failure Patterns, and that you understand:

  • support and resistance are levels where balance often shifts,
  • candle and chart patterns are not just shapes,
    but traces of crowd psychology and position structure,
  • the same pattern in different contexts can carry very different meanings and edges.

Here, we take those patterns and ask:

Instead of “this shape means up, that shape means down,”
we ask:

“In what environments, and with what structures,
does a given pattern actually create a favorable probability for a trade?”

We will translate that into strategy structures.

The diagram below shows:

  • on the left: at a box range top/bottom S/R,
    how bounce vs breakout scenarios diverge,
  • on the right: how a double top and a fakeout
    can act as a trend reversal, a mean reversion swing,
    or a stop-hunt trap.

The goal of this section is to connect the patterns you learned in Patterns to:

within a single coherent system.

1. What is a pattern-based strategy?

Many traders start with patterns by thinking:

  • “When I see this shape, price does ●●; when I see that one, price does ▲▲.”

In live markets, however:

  • the same double top could be:
    • a double top at the end of a strong uptrend,
    • a double top at a repeatedly sold range top,
    • a double top within a mid-trend pullback in a downtrend,

and each carries a different meaning and edge.

In this section, a pattern-based strategy means:

  1. Structure: S/R, swings, and the geometry of the pattern
  2. Context: trend strength, volatility, and position distribution
  3. Risk: stop, target, and position sizing

weaving all three into a scenario tree where:

“In this environment, when this pattern completes,
going in this direction offers acceptable R/R over a series of trades.”

2. The main strategies in this section

Within Pattern Strategy, we will study the following strategies:

  • S/R Pattern Strategy

    • Turns support/resistance from S/R
      into actual entry/stop/target structures.
    • Separates S/R bounces vs breakouts
      from both trend-following and mean reversion perspectives.

  • Double Bottom/Top Strategy

    • Interprets double tops/bottoms not as simple “M/W shapes,”
      but as distribution/accumulation structures.
    • Connects directly to Double Top/Bottom.

  • Breakout/Fakeout Strategy

    • Builds strategies around breakout success/failure and
      fakeouts that push beyond a level and snap back,
      using Failure Patterns as a foundation.
    • Clarifies when these structures are trend-following entries
      vs mean reversion entries.

  • Fibonacci Strategy

    • Uses Fibonacci retracements/expansions from Fibonacci
      together with S/R and swing structure
      to design pullback entry and take-profit zones.

  • Elliott Wave Strategy

    • Applies Elliott Wave concepts from Elliott Wave
      in a simplified way:
    • focuses on broad wave structure + key S/R + risk management,
      instead of memorizing every micro-rule.

Each article treats these as the “pattern pillar” of your system,
tied into:

3. How patterns relate to trend and mean reversion

Patterns can support both:

  • trend-following, and
  • mean reversion.

For example:

  • S/R Pattern Strategy

    • A strong breakout through a range top S/R
      with alignment from MA 60 Strategy
      can be treated as a trend-following breakout.
    • The same area showing a brief push above, then a sharp return inside
      (a fakeout) may become a mean reversion / fade setup
      closer to Mean Reversion.

  • Double Bottom/Top Strategy

    • A double top within a mid-trend pullback
      might be just a short-term mean reversion move.
    • After a long uptrend, with DMI/ADX
      showing weakening trend strength, a double top
      can be a true trend reversal candidate.

So patterns do not automatically choose “trend-following vs mean reversion” for you.
Instead:

They strengthen the case for one scenario vs the other,
given the broader environment.

Throughout this section, you will repeatedly see how:

share responsibilities with pattern-based entries.

4. Timeframes and scenario design

Pattern-based strategies are highly sensitive to timeframe.

In this section, the default framework is:

  • Daily: big-picture structure, major S/R, primary trend,
  • 4H: pattern completion, entry timing, candle patterns.

For example:

  • Daily

    • a range top S/R tested multiple times,
    • moderately sized Bollinger Bands from Bollinger Bands
      (not extremely wide),
    • DMI/ADX showing non-extreme ADX (no blow-off).

  • 4H

    • a first breakout above the range top,
    • then a Failure Pattern-style move
      where price pokes above and quickly returns inside the range,
    • long upper wicks + evidence from tape/volume
      that selling is dominant at the top.

→ This combination points to a failed breakout + pattern-based short mean reversion candidate.

In all pattern strategies, we maintain a 3-step structure:

  • environment (daily) → pattern/trigger (4H) → risk structure (R/R, sizing).

5. Common pitfalls in pattern-based strategies

5-1. Seeing patterns everywhere

The human brain is very good at recognizing patterns.
Stare at charts long enough and you will see:

  • “A double top here, a triangle there, a head and shoulders over there…”

It is easy to end up with too many patterns.

Solution:

  • First restrict attention to key S/R zones
    based on S/R.
  • Use MA 60 Strategy and DMI/ADX
    to separate trending vs choppy environments,
    then only focus on patterns suited to that environment.

5-2. Trading the pattern name, ignoring environment and risk

Statements like:

  • “There’s a double top, so short,”
  • “There’s a head and shoulders, so short,”

are pattern-name → direction shortcuts that often lead to:

  • treating a mid-trend correction as a full reversal, or
  • applying a mean reversion mindset in a strong trend.

Patterns only gain real meaning inside the frameworks of:

5-3. Taking “pretty patterns” with poor R/R

Some patterns look perfectly textbook, but when you:

  • place a logical stop and
  • define reasonable targets,

you find the R/R is worse than 1:1.

In this section, every strategy is evaluated through:

to ensure the pattern makes sense not just visually,
but also in risk/reward terms.

6. Roadmap: what’s next in this section?

  • and shows how to combine it coherently
    with trend-following and mean reversion strategies.

Pattern-based strategies are best viewed not as:

“shape-matching tricks,”
but as one more edge that combines structure, environment and risk.

If you treat:

you can design an account where,
even as market regimes change,
at least one pillar remains relevant,
giving you a portfolio-style trading system rather than a single fragile setup.