Trading Rules vs Patterns vs Regularities

What is the difference between a trading rule, pattern and regularity ?

A trading rule is the basis for many strategies for trading. It is an instruction (which can be a guide for the trader or a rule for a trading system) to make entries and exits based on certain triggering events being true. For example, to enter a trade when RSI has such a value and a moving average has such a value. A pattern is a shape on the chart, which is a record of a past move. The trader can look for evidence of the formation of a pattern and take positions accordingly.

A regularity is a repeated market outcome which happens based on market events, such a liquidity changes. A regularity would be the tendency of a market to move in a given way when markets open or close, perhaps augmenting or creating a pattern. So at a market event (such as open and close) the trader can see if the regularity reappears.

A regularity can be seen as an attempt to classify market events (and hence try and make them tradable by seeking to find them as they form) but based on a looser definition of rule or pattern, which is conformal to the way the market actually moves to some extent. Meaning the market does not necessarily over time move in a way which is susceptible to a rule or pattern based approach.

One way of looking at news trading is seeing it not as a rule or pattern but a regularity based on liquidity changes. One practical reason for doing this, is because it is not typically amenable to rules or patterns based analysis, as it is driven by liquidity. However even within a news trade, regularities can be seen, such as respecting support and resistance, but not necessarily in a predictable way, just that it happens. The less a news trade is driven by liquidity, for example when the surprise has been taken out of it (to some extent) the more it can become a volatile move.

So a chain of trading patterns can be seen rule -> pattern -> regularity -> volatility. Which is more suitable ? It may depend on market conditions (which can change). Sometimes rules may work, sometimes patterns are clear and sometimes regularities are more tractable. A volatile market tends to make none of these possible (it is not typically a tradable trading pattern), but it can be a necessary precursor to the creation of market conditions amenable to these trading patterns.

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