Does the world need another chart pattern application?
Open any securities trading magazine and you will be inundated with advertising for technical analysis tools. The common theme of all these tools is to display the computationally simple technical indicators that traders use. What they generally do not do is recognize the classic chart patterns like “head and shoulders” or “triangles” that you find in books about the subject. I think there are two reasons for this.
Firstly, the patterns are not simple to find algorithmically. There is the issue of where the turning points in a price chart occur and how to detect them. This is not trivial. The standard approach is to smooth the price data to locate the smoothed turning points, but the results of this depend on the smoothing constant chosen. The actual high or low point of a smoothed series may not be at the high or low point of the raw price data either, making the determination of the patterns difficult.
The second reason is that technical analysis of charts is an art. No two practitioners will agree on precise rules for determining the pattern, or even how precisely the measurements have to be. As a result, some practitioners draw patterns that seem to have only the most tenuous relationship to the underlying price series.
As a result of these issues, the few chart pattern recognition algorithms that exist tend to be based on fixed parameters that you cannot alter, and often expensive services or add-ons for existing price display software.
In contrast, what I have tried to do with ChartShapes is to provide a default algorithm for the patterns and allow you, the user, to modify those parameters so that you can customize the algorithm to better meet your needs. For example, if you find that the result of my default parameters is too precise and seems to eliminate patterns that you think are obvious, you can change those parameters until the algorithm finds what you expect. These parameter changes can be set and used on all subsequent use of the software.
As far as I know, this approach is unique and I hope that it will find a large number of interested users.