How To Profit With Chart Patterns (With Aksel Kibar) 

Today we have Aksel Kibar on the show, an ex-fund manager and a classical chart pattern trader.

What’s interesting about Aksel is, he has one of the cleanest charts I've seen on Twitter.

No unnecessary indicators, messy lines, or whatsoever. One look at his charts, and you know what the market is trying to tell you.

So during our conversation, we talked about…

1. His life in the army and the things he did

2. How he landed a job as a fund manager

3. Classical chart patterns (the things he looks for before he places a trade, entries, stops, and targets)

4. The 4 types of breakout trades every trader should know

5. How he scans the market for trading opportunities (using a daily and weekly routine)

Sounds good?

Then go listen right now...

Rayner (00:00)

Hey hey, what's up my friend?

So in today's episode, we have Axel Kibar.

He's an ex-fund manager and a classical chart pattern trader.

So one thing that's interesting about Axel is that if you follow him on Twitter, or nowadays they call it X, right?

You realize that his charts, right?

Honestly speaking, it's one of the cleanest that I've come across on the platform.

He doesn't have those messy indicators, squiggly lines covering all over the charts No…He’s charts are very clean and one look at his chart.

You would sense what the market is trying to tell you.

So, Aksel has one of the best charts that I've seen on the Twitter platform Or should I say, X platform.

Anyway, if you want to connect with Aksele, I'll put his social media profile in the description below.

Now during my conversation with Axel, we covered a few things.

First, we talked about his life in the army, what are the things he did, and the lessons he learned back then.

Then we spoke about how he landed a job as a fund manager.

Let's be honest, this is a job that I think most of us want to get but we just somehow don't know how to go about doing it.

So he shared the process that he did to land a job as a fund manager.

Then moving on, he talks about classical chart patterns because this is the way...

He trades the markets, he shares with us what he looks for in the charts, his entry, stop loss, and targets.

Then he also shared the four types of breakouts that I feel every trader should know because not all breakouts are equal.

So he shares these four different types of breakouts, how you should go about identifying them, how to trade them, and how to manage the breakout trades, depending on the type of breakouts that you are encountering.

Then finally towards the end, he shares how he goes about scanning the markets for trading opportunities, his daily routine, and his weekly routine.

So we are gonna cover all this in today's session.

Go listen to it right now.

Rayner (02:01)

Okay,

welcome Axel to the show.

I'm so happy to have you today.

Aksel (02:07)

Hi, Rayner, it's a pleasure to be part of your show as well.

Rayner (02:12)

So to kick things off, I once heard that I think on another trading podcast that you were in the army, so maybe to kick things off, what were you doing in the army previously?

Aksel (02:23)

Well, the army is in Turkey, it's a mandatory service. So we cannot exactly say that it's hardcore military service, but everybody has to do it.

And I was one of them as well.

So basically, this is how it works. Over the years, they shortened the period of the military service in Turkey.

My parents used to do it for 18 months and maybe even more.

Some have done two years of service.

So in my case, what happened is that if you're a university graduate, you are only doing it for six months.

So the time shortened and shortened, and now I think it is a paid service.

So if you, it's like basically they hire military personnel.

So now what I have done is six months.

I had the option to do it for 12 months with a higher rank, but I decided to go for six months as a soldier.

I was a Marine soldier on the West coast of Turkey.

It was, I would say everybody in the beginning is scared of the military service and they feel like it's a waste of time and it takes away from their life, etc.

Then when you talk to people who have done it, they always have good memories.

I never thought that I would have good memories after it.

But it's true because you get to meet a lot of interesting people there from different parts of the country, different levels of education.

It's funny, it's stressful, and I mean there is always a risk of war, but it's more of a defense part of things that keeps you always alert, not that you're gonna go to war, but at the base basically, there was always stress.

That stress keeps you alert and in the beginning, a few months, because of that stress, you forget what you were doing in real life.

The first month is usually the basic training, disciplinary training, the orders, and so on.

After the first month, there's the ceremony and then you move to the next stage, in which you spend five months and a little bit more expert status.

In my case, almost in everybody's case, they try to look for your educational background and try to utilize that.

So if you're an engineer, you might be taking part in the car workshop.

I was an economist, so the most suitable section for me was the accounting department of the cafeteria.

So I was responsible for six different stores and basically, this came after my four years of economics study and I would say that I learned the most in...

In that military service accounting department or the supermarket section, then four years of economics study.

So it was such an interesting experience that you get to learn, because we had the base of a thousand people, and a thousand people fill up the base, and then they get their training after two, three months.

They are moved to their original military bases.

So we were basically a training camp sort of a place and so you max 2,000 and then you drop 200.

I have seen this cycle twice during my six-month stay.

When it reaches 2,000 people, you're talking about a huge economy there.

Okay. So let's say — The restaurant doesn't have good food.

Everybody piles up to have a toast or some kind of snack from the cafeteria and the sales go up like crazy So military is not supposed to profit from sales.

So we buy things with boxes And when you divide the items into 25 units or 30 units you get the price tag off the cost is 22 fills

So you have to, you cannot round it to 20 fills.

You have to round it to 25 fills.

So when you round it to 25 fills, you get 10 to 15% profit, and over 1,000 units to 2,000 units of sales, you get to see a massive profit-building up in the cash registers.

So... Basically, I've seen how the population has an impact on the economic success of small stores.

So the masses going wild on water in the middle of the summer, and all these small, small profits piling up is giving you some kind of crazy profit at the end of the month.

That profit was being distributed to soldiers in need who didn't have financial support from their families.

So like some kind of a salary being given to people in need.

That was the economic background of what I have been doing. I was responsible for six different stores at the end of each month.

We used to try to match the cash register and the items that were being sold, etc.

Ordering of utilities, toilet paper, T-shirts, tea, you name it, everything that was available.

So buying the newspapers, and making sure that the stocks were available were all my responsibility and I was managing six different stores out of which three of them were kids that have had a university background.

Three of them were primary school graduates.

So as you can see different educational levels from different parts of the country and the university grads were able to match their cash pile because you give change.

You take, let's say — a thousand Turkish lira and you give change.

Sometimes the other kids were making mistakes.

So there were shortfalls in the cash.

So they had to put it from their pocket, from those mistakes.

Yeah. Ouch.

Yeah. So that's life.

So you get to see different parts of the country, and different educational levels, and these all were good memories because they all taught me what life is about.

Because you don't get to see, when you're working as an economist or an analyst in a bank, you don't get to see everybody, all kinds of profiles.

But in the military service, you get to share the room with them and with different people, different educational levels, and different statuses.

So it was a different experience.

I enjoyed it.

Like people who have commented on it after completing their military service, I also share the same views.

Now, they always say that even if you want, you cannot go back and that's true.

Like, and I'm always telling my friends and my family, I wouldn't mind going and spending two months now with the same crowd and doing the same things.

So it was that part. It had to be done, but I'm glad.

I was given the chance to do it for a longer period.

Rayner (12:16) 

I can relate to it as well because in Singapore, right, all the mail we have to serve a compulsory two-year national service. I mean, it used to be 2.5, but now it's for two years.

Then they slowly cut it down just like, you know, what you said for your country.

So yeah, many lessons learned.

I think for most of us who completed our time in the army after two years, we all kind of like nodding.

Yes… That was a good experience.

We initially, when we thought going in is a waste of time, you know, I'm holding back my career But when you look back, the lessons learned are stuff that you won't learn elsewhere.

You learn about how people behave, right?

Their true colors, you know Your EQ, how you interact with others of different statuses others of different personalities and backgrounds.

So it was very enlightening for me as well so same sentiments, right?

As you've shared after going through the army.

So my next question to you is that, you know, regarding the army.

So what are some of the lessons that you learned right while going through that six-month journey in the army?

Aksel (13:13)

The lessons... I mean, relationships matter.

This is something that I've learned from, it's a replica of corporate life as well.

The picking order ranks,

Ah.

What you should be doing and what you shouldn't be doing, basically, rules-based, strictness, the discipline.

All those were very, very helpful later in life that you get to see those and then you move to corporate life or even in life.

You get to see that, okay, you know, this is the pecking order.

We have to respect that.

We cannot step ahead and step over the hierarchy.

There is that hierarchy. It has to be there.

We have to follow certain orders and in general, I have always been a disciplined person.

Be it with following up on things and waking up time etc.

So those qualities helped me during my military service. So many funny moments related to that.

Rayner (15:15)

You could share any funny moments that come to mind?

Aksel (15:18)

I mean when you're serving one of the most important things is we get them because we used to drop to 100 people in the base from 1000 and when it is 100 you get to do all the chores yourself 100 people so you cannot give it to the newcomers so you have to handle it yourself.

Serving was one of them serving at different parts of the base and noon at 10 o'clock.

We used to start 10-12, 12-2, 2-4, and then 4-7 because we were short in numbers.

Every day they used to write a location to be served.

You go and get your gun and go to the serving point.

The place that I was guarding was the ammunition depot, which was right across the cafeteria, supermarket, and warehouse.

So my friends used to pass by in the middle of the night when I was serving.

They are also serving. Um, they were a duo and I was, uh, alone on one side and, um, they used to ask me, come on, can you get us some tea from the inside?

I used to say… No way.

Like I cannot move from my place because if, uh, the commander and, and, uh, the commander comes, you cannot, you cannot do that.

So they used to change with me a place.

One of the guys used to stay in my place.

I used to walk with the other guys and open the store and get them in the middle of the freezing winter, some tea, as they were serving.

So, I mean, these are friendships.

You cannot break that because you live with them. You're sharing the space. Those are the small things that you have to violate.

But, um...

Yeah, good days.

Rayner (17:55)

When you mentioned serving, do you mean staying on duty, remaining at your spot to make sure no one comes as serving?

Aksel (17:59)

Yeah

Rayner (18:01)  

Okay, okay.

Just one last question before we move on. Move on, right?

So as you were, you know, in charge of the store, you know, selling items.

What are some of the more popular items that, you know, people in the army love to buy?

Aksel (18:13)

Uh, it was more food items because whenever there is the food in the restaurant is not that good.

They used to pile up for toast and tea in the winter.

So tea was one Turkish lira at the time before all this inflation and so on.

So the guy that was managing the tea store one month, had a big shortfall, a large amount of shortfall.

When we asked, we realized that his friends were coming and saying, can I get one tea and he gives the tea and I will pay for it later.

So one Turkish lira is not possible to collect from here and there.

So it piles up.

A hundred kids, it's a hundred Turkish lira shortfall.

So that's like 10% of the population of the base in one day.

So if you repeat this five times a month, you have a shortfall of 500 Turkish lire and that's a sizable amount where the salary that the military service was giving to the soldiers at the time was 35 to 40 Turkish lira.

So that's 10 times the year the money that they were paying for the month.

Yeah. OK.

Rayner (19:50)

So let's maybe now move on and talk about the fund management world, because from what I've gathered, you were a fund manager back in the UAE.

So curious to hear, what's the process like of getting such a job back then?

Aksel (20:11)

So here is how it started.

It's an interesting story as well. After the military service.

This military service comes after my master's degree in Canada.

So I was one of the first in the family that traveled abroad and studied and then came back, finished the military service and after the military service, I started looking for jobs and I found a couple of jobs in Turkey.

I started in a guarantee bank, one of the biggest banks in Turkey.

In their asset management department, I started working, but it was a two-week journey because meanwhile, I was receiving emails from a couple of friends that they were looking for a CMT in Abu Dhabi.

The National Bank of Abu Dhabi was looking for a CMT Charter and at the time I started working in Guarantee Bank as an investment analyst.

So that had a lot to do with the fundamental research and I enjoyed charts and I enjoyed the technical side.

But as a start, I was okay to take the investment analyst job.

Meanwhile, because I received this email from another friend for the third time, I said there was something about this. I should consider it.

I didn't know where Abu Dhabi was at the time because the advertisement was 45 minutes from Dubai.

So when I talked to friends, they said Dubai is the New York of the Middle East.

So I started searching, I started searching the bank, National Bank of Abu Dhabi, a semi-government-owned bank.

When I started searching, I said — This is a good opportunity, maybe I should apply for it.

I applied for it.

The answer came as we needed a little bit more experience in the field and this was in 2007.

In 2007, I graduated from economics in Turkey in 2004, got my charter, and then after that masters.

When I was studying economics, I also did an internship at Yuppie Credit Bank, which was also a big, one of the biggest banks in Turkey.

So while doing all those, experience was not possible to fit somewhere.

You cannot get the working experience.

I had an internship experience, which was almost like working because I did half-day school, and half-day bank for three years.

So they asked me — They told me that we were looking for more experience.

So I didn't take no for an answer.

I wrote back because I was very comfortable with my knowledge of charting and technical analysis.

I knew that I was good at it. So when I wrote back, my ex-CEO liked the reply and he liked that I challenged it and he got back to me and they set up an interview call and after that call, they were convinced that I had the knowledge which probably compensated for the experience side.

I had to excuse myself from Guarantee Bank, which they were not very happy with.

But the higher the management, the more understanding they were.

So the CEO was more understanding and he said that we understand it's a much better offer and fewer places available if things don't go well.

So I took the offer and I flew to Abu Dhabi.

I started as a technical analyst at the National Bank of Abu Dhabi.

It was 2007, and we were gonna get hit by the subprime mortgage in a few months.

So going to a land.

Uh... which was the most affected by subprime mortgage and the real estate crash was a really interesting experience because when I went there uh... the markets were already uh... falling from 2005 to 2007 they were already in a downtrend.

People were uh... people didn't want to even talk about the stock market and I saw the opportunity that the market is bottoming, at least for a short relief rebound.

At that point, I joined the department, asset management department as a technical analyst.

I had a couple of good calls because the market was rebounding and nice classical chart patterns were appearing.

So It was an opportunity for me to show my skills, which later on allowed me to manage funds because I had some good calls and and caught some nice ideas.

So that helped me to get the fund management to the fund management site, which I was given in 2008.

The UAE, National Bank of Abu Dhabi's UAE trading fund, was the largest fund in the UAE at the time.

I think somewhere around half a billion dollars.

So I started managing that during the subprime crash and UAE is not diverse, it was not a diversified economy at the time.

Now there are more IPOs, malls, etc.

The entertainment side is being IPO'd.

There was not even an airline that was IPO'd at the time.

So it was more like banks or real estate and both were getting hit because of the real estate collapse but banks held much better real estate side of things fell apart so it was a difficult period to manage that in an illiquid market at the time of the crash.

That's how I started first as an analyst and then as a fund manager.

Rayner (28:25)

So as a fund manager, how do you then manage the money?

Do you day like, hey, Axel, here's $10 million?

Grow it to $20 million, or do your best, or whatever.

How's the process of managing that money?

Aksel (28:43)

So we had our funds benchmarked against the MSCI UA index.

There was this MSCI UAE, domestic MSCI UAE international index.

There were two types of indices.

Domestic internationals were not allowed at the time to invest in certain stocks, strategic telecom companies, for example, were not available for investment.

But local local funds were able to invest in those.

So for example, we used to look at the MSCI-UA International Index and MSCI-UA Domestic Index and we used to run it, run the funds against this benchmark.

We had 25 to 30 names in it approximately maybe less even.

You don't have a wide universe…

Okay and real estate for example MR properties was close to 25 to 30 percent of the fund.

So it's mostly taking a bet on big names by just underweighting the real estate sector from 35 to 40 percent to 20 percent was allowing you to generate alpha.

It was a bet on whether you're into the banking sector or you're into the real estate sector.

By making that call at the time of the subprime crash, which started hitting the UAE market a little bit later than the US market.

The crash started a little bit later.

I was able to liquidate big amount of large amount of real estate and at the time, the Dubai real estate got hit more than the Abu Dhabi real estate because Abu Dhabi was one step behind in terms of development.

So they were not caught in the middle of the development stage.

They were still initiating projects and trying to catch up with Dubai.

But Dubai already built its man-made islands, villas, high rises, and marinas.

So that market got hit first.

So the stocks that were listed on that exchange were more liquid as well.

So it allowed me to reduce my exposure on those.

The basic idea was when you are managing it against the benchmark, you have somewhere to hold on to it.

It's easier than a complete blank sheet because you just need to look at the relative performances against the index and see the stocks that are underperforming.

Stocks that are below their long-term averages, start with that.

You don't want to be neutral even in those names.

So any cash that you can raise, I was allowed to go into MENA equities outside of UAE.

So we had the allowance of a 30% off index exposure.

This was giving me at the time my CIO told me that this is more like a satellite approach you're applying here.

So the the underweight positions, the cash that you get from from those I was applying with into MENA equities, Saudi Arabia, Qatar, Oman. So I created this wide opportunity set for myself and started.

Exploring breakout ideas.

So that's my basic starting point with the breakout strategies because I was trying to capture a couple of weeks of strong directional movement with this cache that I have taken out from underperforming names.

Trying to generate more alpha on the Directional moves that I was able to capture in off-index names.

When you go into off index you have slight risk because you're moving away from the benchmark, but that's the only way to outperform an index.

You cannot hug the index.

You have to move away a little bit.

I used to take, for example, four to five different positions outside of the index and try to capture those directional moves, which brought me to my current strategy today.

That you start with a blank sheet and you look at a wide universe of breakout ideas.

Rayner (34:25)

This brings me to my next question which is you know why breakouts I think from what I've gathered you've tried many types of trading approaches right?

Indicators you know patterns and stuff like that and now I think you mentioned you know you went with the breakout so why break out?

Aksel (34:40)

Why break out?

It's a good question.

When I joined the National Bank of Abu Dhabi, my CIO was advanced in charting and technical analysis.

He had this knowledge.

He sat with me and he said — Axel, in these markets, these markets are momentum-driven.

So there are fewer market makers in these markets.

It's more emotional psychology-driven moves.

With that mindset, I went through the whole universe in the region and started looking for those types of tight consolidations and how stocks are behaving and so on and I came to realize that…

Yes, you have more and more stocks breaking out of a consolidation trends are more persistent.

It is not, people are not feeding off those trends, they are piling up into those moves.

That's how I started applying flat-range breakouts in stocks.

It was more of a kind of a direction that I was pushed towards to explore these side of things.

Then as I looked more and more into breakouts, I came to realize that by just adjusting the time frame, you still have the chance, even in international stocks.

These types of consolidations that you can play as a breakout strategy.

Rayner (36:43)

So would you say that, you know, earlier you mentioned the, your CIO said that in these markets, I think he's referring to markets which are less watched or maybe markets which are not as popular, like maybe stocks like Tesla, Apple, etc?

This type of stocks, they break out tend to be more real compared to the more popular stocks like, you know, Tesla, Apple, Amazon.

Those types of breakouts, tend to not work as well.

Did I get that right?

Aksel (37:07)

Yeah, I can say that.

The most popular names are more crowded, obviously, but that doesn't mean that you cannot find breakouts in those names.

It's just they probably form less frequently.

For example, on Tesla, you might find a five-year-long consolidation breaking out, but that's a five-year-long wait.

If you go and try to find two, three-month-long consolidations, textbook-tight consolidations, it might not happen on Tesla.

Less popular names might have those opportunities more frequently.

But very liquid and crowded stocks will give you less frequent opportunities like that.

For that reason, I made sure that I looked at a wide universe.

I spent a lot of time going through charts.

For me, ticker doesn't matter.

So I don't even look at the ticker. I just look at the chart itself, the right side of the chart, and try to see the consolidation that I'm looking for.

So many people are trying to focus on too many patterns at the same time while looking at a single name, which is forcing them to find something.

On the chart which doesn't exist.

So what I'm doing is that I have a wider universe and a few select patterns that I'm trying to look at.

So I'm not limited to a crowded trade.

I can look at less popular names and try to capture that directional movement as well.

Rayner (39:26)

Okay so would you then share what are the things that you look for in a chart from what I've gathered, things like rectangles are one of your favorite patterns, so maybe you can go into some details and share what you look for?

Aksel (39:38)

So let's say, first of all, my main motivation is to look for horizontal patterns that are horizontal being able to manage the trade with a predefined stop loss.

So for example, a symmetrical triangle has an upward slope and, a downward-sloping upper boundary.

At the time of the breakout, you act when the stock is breaching the upper boundary and you place a stop loss below the pattern boundary.

That's the logical place to put a stop loss, a protective stop loss.

So right after that, if the stock starts pulling back sharply, it goes back to the boundary.

It is below your stop loss, but the pattern is not violated.

So that's a challenge with diagonal boundaries, trading the diagonal boundaries. And new traders, new analysts always have this tendency in the beginning to draw trend lines and diagonal boundaries for some reason.

Which…How can I say takes away from their couple of years of practice to focus on horizontals until you realize that the meat is actually in the horizontal setups?

I lost as well easily one to two years of my time looking at these trend line breakouts and so on.

Is the horizontal setups.

So out of the eight classical chart patterns I have defined, seven of them are horizontal setups.

So for example, ascending triangle, descending triangle, head and shoulder continuation, head and shoulder bottom, head and shoulder top. Rectangle is another one.

The cup with the handle is another one and the eighth one is a symmetrical triangle.

This is one of the most popular.

So I only look at a symmetrical triangle as a chart pattern with a diagonal boundary.

But out of all those, my favorite is a rectangle because of its frequency.

So frequency is important.

You don't wanna end up with 50 ideas for the whole year.

You want to have 100 ideas, and 200 ideas to pick and choose from because once you find the idea, it doesn't mean that it's a good trade.

You have to go back and check slightly its fundamentals, the volume pattern, et cetera.

If there is a new spending right before a financial announcement, you don't wanna trade that pattern.

So you want a wider opportunity to sell and Rectangle provides that.

So…I came to realize that more and more rectangles are appearing on charts and they end up being reliable.

 Just to give you some statistics over 7 years of chart pattern signals, I have 1526 occurrences.

654 were rectangles.

So close to half of them were rectangles that formed on price charts.

Now this could be a bias on my side because the more I realize that rectangle is succeeding or they are reliable, the more my eyes are looking for that.

But also rectangles are easier to recognize on the price charts because they are so clean tight consolidations on the price chart.

So out of these 654 over the past seven years, 415 of them reached their price objective giving a success rate of 63.5% so the overall success rate for eight chart patterns is at 59.5%.

So clearly rectangle is above that average giving you the upper hand that if you keep on focusing on rectangles, you will have a better edge in finding profitable setups.

For example, people say, what is the requirement to find the rectangle?

What are the qualities that you're looking for in a rectangle?

For me, a rectangle needs to have a minimum of two touchpoints.

So you have two highs to draw a line. But the third one, if it's a breakout, it's less reliable than the fourth one when it's a breakout.

So I like several touch points to a boundary.

My eye keeps on looking for these more frequent tests of a pattern boundary and I think that the more tests of a pattern boundary, the more valid that level is.

So around that level, many transactions happen.

So buying and selling happens.

So it's an average, it's a cost area.

The more developed it is, the stronger the breakout that follows it.

So even with head and shoulder continuation or ascending triangle, the same thing applies when you have that horizontal boundary.

I like to see several tests of it.

If possible, three, or four tests, and then the fifth one is a breakout or the fourth one is a breakout rather than the third one is a breakout.

So with that, I have more conviction to go ahead with that breakout signal.

Rayner (46:14)

Okay, let's say now we have maybe three tests and now the price is about to test it for a fourth time, right?

So what is the specific pattern trigger, whatever you want to call it, that will tell you, okay, now it's the time to buy?

What's the thing that you look for?

Aksel (46:28)

So ideally, the stock needs to break out strong.

Now there are different methods to confirm a breakout and this is one of the questions that I get a lot.

I feel like a lot of people are spending too much time on this, focusing on this, than actually focusing on what matters.

So what they are focusing on is how to avoid the false breakout and I always say that there is no way you can avoid a false breakout.

False breakouts are gonna take place.

Okay.

So this is a trade-off now.

The breakout takes place with a long white candle.

That's a breakout confirmation. But then we're late.

For example, gold on a monthly scale, huge monthly candle, it's a breakout, but we're late.

Well, if you're looking at a monthly scale price chart, that first month of a breakout from a five-year lock consolidation is not gonna be over in two months.

So you are talking about a multi-month-long uptrend that's starting.

It's okay to give away the first 5% or 6% of that move on a larger scale.

So ideal condition is to look and wait for that long white candle to take place.

Okay.

What about the daily charts?

If we wait for a 6% move, the move is let's say 15%, half of it is gone.

Yes, I agree with that.

Then you need something else.

Something else needs to be placed in the strategy.

So one method is looking for an ATR based entries.

So you define the upper boundary, okay, and ATR is the average true range. It is the volatility of the stock.

Let's say 10 periods of ATR.

You can take 10 periods of ATR and add a certain percent of that ATR above the boundary and to be early, you act with a stop limit order.

What's the trade-off?

The trade-off is that at the end of the day, you might find the stock not breaking out actually.

So your protective stop is below the pattern boundary and you're in a stock that didn't break out strong.

But that is the trade-off, we have to face that trade-off.

Now that's gonna reduce your win rate, but your reward when it breaks out is going to be much bigger than your reward when you wait for a confirmation by the end of the day which will compensate.

So your reward to risk is going to increase from let's say — Two one to two to one to four with that type of early entry but your risk reward is going to improve.

So a lot of people don't want to be wrong and they want to avoid it.

So it's like a trade-off. So a lot of people are going in between this.

Wait for confirmation, but we're late.

Don't wait for confirmation.

Act early, but we get false breakouts.

So the way to compensate is to accept that when it works with a 40% win rate, your reward is going to be 1 to 4 or 1 to 5, which will compensate for the loss of win percent.

So these are the two things that people have to make peace with.

You either accept a 60% win rate waiting for a breakout confirmation and accept a 1-2 or 1-2.5 or 1-1.5 or a little bit less win rate but a higher reward.

Rayner (51:26)

Okay, and what about that stops?

Earlier you mentioned that your stops are really below the pattern boundary.

Am I right to say that it's at the low of the breakout candle bar?

Aksel (51:36)

That also can be managed with an ATR.

So you can easily set up a percent of ATR below the pattern boundary, and then your stop limit entry and the risk are predefined.

So you know that ahead of time before you even enter the trade.

Rayner (51:59)

Okay, just to clarify when you talk about the pattern boundary, so let's say…

We talk about the rectangle, would the pattern boundary be referring to the resistance which is a breakout level point, or would it be the low of the rectangle which is the near support?

Aksel (52:12)

No, the pattern boundary would be the breakout level on the upper side.

Rayner (52:14)

Okay, that makes sense.

Aksel (52:15)

So we're talking about a long trade here.

So you defined your pattern boundary at 60.

So 60 is your pattern boundary and then you calculate your ATR and let's say 62 level is the ATR that you would act during the day, intraday.

So you act on 62 and then the same amount of ATR you remove from the pattern boundary you have 58.

So 62 minus 58 is your risk of $4.

Rayner (52:52)

Okay, that makes sense.

Then what about targets?

I think from what I see on your Twitter feeds, your target is usually price projection.

Let's say the rectangle is between the lows is $50, the highs is $60, and your target is usually $10.60 minus $50.

So is that usually how you go about setting your targets?

Aksel (53:08)

Yeah, that's the depth of the pattern.

You take it, that most of the patterns are the same, but price targets are guidelines.

So the price can exceed the pattern price objective.

Now what I have

The service that I have started with is classical chart patterns and pattern identification, one size doesn't fit all.

So everybody has a different style.

Some people don't use stop loss.

Some people use stop loss.

Some people look at weekly scale charts, and some at daily scale charts.

I advise people not to look at intraday charts because it's too volatile and easily manipulated.

So daily and weekly scale, I try to focus, even sometimes on a monthly.

So what I have done is I have categorized breakouts.

I said, there are four types of breakouts.

One, type one.

Stock breaks out and rallies to the price target without any pullback.

There is a type two breakout, stock breaks out, pulls back to the pattern boundary, and then rallies to the price target, price target is met.

There is a third type of breakout, which breaks out, pulls back to the pattern boundary, and dips below it.

Okay.

So now you have this guy who

Uses a tight stop loss below the pattern boundary, and tries to maximize the risk-reward.

Okay.

This guy needs to focus on the universe of type one and type two.

So that's his playground.

That's actually what the outcome he needs to expect from the breakouts and when I look at that, the type one and type two over the seven-year period, classical chart patterns that I have analyzed, the success rate is at 47%.

So you can see that.

The success rate from 59.5 dropped to 47 percent, but only for those who are applying a tight stop, this will generate the edge because 47 percent with a one to three risk reward is a successful strategy.

Now type three breakouts, when you take the type three breakouts, which I'm assuming that if you have a tight stop loss below the pattern boundary and price dips, you're stopped out.

Okay.

Those are out of the 59.5% success rate, those are the 12.5% are those. 12.5%.

Now, one thing I've realized is this. Between type one and type two, type one is 27% of the breakouts, type two is 20% of the breakouts.

What does that mean?

That means if you are waiting for a pullback to enter, 27% of those breakouts you're missing out.

So the conclusion is this, breakouts.

Should be acted at the time of the breakout.

To be able to capture the most rewarding ones what I've realized is type one breakouts which break out without any pullback and the value to the price target are the ones that exceed the price objective.

What does that bring us to?

So if you calculate your risk reward, initially as three, one to three, with the price target in focus.

You realize that it's a type one breakout.

How do you realize that it's a type one breakout?

The stock broke out and rallied to the price objective without touching the price objective.

We're very close, like 2% away from the price objective.

At that point, you realize that you're riding the type one breakout, okay?

So you've already calculated one to three.

Why not wait for one to four and one to five?

There you capture the most out of a trend.

So when you realize that you're riding a type one breakout, my suggestion to all my members and followers is that, wait, trail it with a trailing stop because this is the winner.

This is gonna generate more in this uptrend, which will help you to achieve better risk-reward in the breakout signal.

So type one, type two.

So this is how I categorized the breakouts and this probably is my addition to the literature, let's say — because when you read Schabacher's book.

Schabacher mentions that the best breakouts take place at the time of the breakout, which tells us that we should not wait for the retest I found that from the seven years of statistics when you wait for the retest, it's the 20%.

When you don't wait for the retest, that's 27% of the breakouts.

Then I realized that if you look at those types of ones, they always exceed the price objective because it's logical.

The logic is that if a stock is rallying to the price target, it has momentum.

It's going to go.

It's going to easily go to, your initial calculation is one to three risk rewards.

Let's say…

It's going to go to one to four easily and that one to four, really adds to the bottom line.

Rayner (59:51)

That was informative, Aksel, I appreciate it.

You mentioned, let's say type one breakout, you would raise your target further since there's strong momentum, you go with a trailing stop loss.

So how would you then, you know, trail your stop loss as there are, I think many ways to do it?

So I'd like to hear your approach to it.

Aksel (59:40)

Yeah, the trailing stop is the Chandelier exit.

It's available online everywhere.

So it takes the...

What I'm looking at is the 10-period ATR, but this period can be changed, and the multiples can be changed.

So you hang the chandelier exit, let's say the trailing stop, from the high of that move.

So if a stock is making new highs, it will hang it from that high minus the multiple that you define times the ATR period.

Let's say 10-period ATR you're taking. 10-period ATR means it has a look back at 10 periods of true ranges.

They take the average and give you these ATR values.

So you say…

Okay, I'm gonna hang it four times the ATR, which will give you a wider stop or you can say I'm going to hang it 3 ATR or 2 ATR.

This again, one size doesn't fit all.

People need to sit down and work on it and see which they are comfortable with.

How much of that open profit they are willing to give back?

How their stock is performing relative to their ATR value.

How much of spikes are there in intraday or intra-week?

On that specific stock, if they are going to apply it, for example, in the crypto space, two volatile, they need probably five ATR not to get stopped out.

If they're going with a quiet, low-volatile stock, two, 2.5 ATRs can be applied.

So that you can adjust according to, or you can say irrespective.

This is what I'm going to use, three ATRs or four ATRs and I'm not gonna optimize it as per stock or instrument.

Rayner (1:01:56)

Alright and if I'm not wrong, you mentioned that breakouts there are different types.

Did you say there were four types of breakout or was it three?

Aksel (1:02:00)

Yes, four types of breakout, The fourth is a failure.

Oh, the fourth is a failure, so it's a false breakout?

Yeah, fourth breakout.

Okay, so that one that one doesn't even recover like the type 3 after retesting after dipping below the pattern boundary.

So once it falls below the pattern boundary, it's a straightaway failure.

It just goes down to the end of the range.

Rayner (1:02:26)

Okay, so if that's the case, your stop loss, do you wait for the price to kind of like close below your stop price level, or is it more of like a touch, and then you're out of the trade?

Aksel (1:02:33)

Stop loss should be touched.

You cannot wait for a close because there are all kinds of adverse movements in the market and you cannot wait for a 20% down move at the end of the day to exit a position.

So, stops should always be at the market in my opinion.

Rayner (01:02:52)

Let's say assuming that you're just going to go with a normal breakout, you know, you have your entry, your stops, and your target, right, which is, you know, you're pretty determined ahead of time.

Let's say the trade starts to move in your favor do you then kind of like you know micromanage those trades or it's either going to be hitting your stop loss or your target?

Aksel (01:03:18)

The statistics that I provide are its chart pattern price objectives because like I said if I apply 2 ATR, 3 ATR, which one is serving whom we don't know.

So I give a set of occurrences and that's how I divided them into type one, type two, and type three, so people can get a feel of those numbers.

What I do is define a chart pattern negation level, not a stop loss, but a chart pattern negation.

For example, with head and shoulders bottom, it's the low of the right shoulder that negates the pattern, okay?

So let's say we have a head and shoulder top, the right shoulder of the head and shoulder top is the pattern negation level, which also is the level for a long signal for a head and shoulder failure.

So it works perfectly.

So for ascending triangles, the law inside the pattern boundary, the minor law inside the pattern boundary is the chart pattern negation.

For a rectangle, it's a little bit more subjective because it's a flat area.

So I try to find a level, a minor low inside the pattern that could act as a chart pattern negation level.

So the statistics that I have compiled are either stocks that are reaching the chart pattern negation or they go to the pattern price target.

That makes sense.

Rayner (01:05:00)

Okay, that makes sense.

I'm just thinking through right, you know when you said that you're trading rectangles and then maybe it's a type 4 breakout where it's a failed breakout.

I'm going to assume that that's a chart that you'll probably not trade for a while because right now your rectangle kind of like looks a bit weird with a spike up and spike down or would you kind of like redraw the triangle to take it into account that most recent high of the breakout, the false breakout?

Aksel (01:05:58)

No, I just moved to the next opportunity.

So even when I was managing funds you have a mandate, a benchmark, so the universe is limited, okay, so if a stock is in the index and it had a failed breakout you reduce exposure.

But when it completes the pattern on the upside you have to increase exposure because you cannot.

So you have to, so that opportunity set was limiting. But for individual ideas that you have a blank sheet, you have a complete blank sheet to work on, you don't, you're not limited to that failed breakout.

Because once a faker, it will be again a faker in the future. So why not go with a more clean opportunity?

Start from scratch. So I started avoiding the type 3 breakouts, and re-entry strategies.

Though if you want to capture it, I also have written about it and featured a re-entry strategy as well for those who are limited to a certain universe and need to trade that stock, they need to get in.

So a re-completion of the pattern would be your re-entry strategy.

These are the type 3 breakouts, that's 12.5% of the breakouts.

Rayner (1:07:09)

So what are some of the techniques that you use to reenter such type 3 breakouts?

Aksel (01:07:15)

Type 3 breakouts are those that penetrate the pattern boundary and then recover above the pattern boundary.

So if you have applied the ATR, let's say trailing ATR stops to enter, it could be the same level.

So the stock breaches that pattern boundary.

With the same percentage move or ATR move would be your reentry level.

Again, you will place the stop below the pattern boundary.

Rayner (1:07:47)

Got it.

So from what I'm hearing, let's say…

You know, the price breaks out, it comes back down. Let's say the most recent high is at $60.

So if the price exceeds $60 by a certain ATR margin, you can get long once again as a re-entry.

Makes sense.

Got it.

Awesome.

So maybe now we can know, I think that segment was very technical and I appreciate it.

Even, I learned a ton from that section.

But now I kind of want to move on maybe to a more macro perspective of trading.

So earlier you spoke about entering the end of the week and end of the day, right?

So how do you decide, man, this chart pattern, I'll trade it at the end of the day, or this one will be an end-of-week chart pattern?

Aksel (01:08:30)

How do you kind of like decide on that?

It's the scale that you're looking at.

So if you're looking at a daily scale chart, it's important to focus on the end-of-day price action.

If you're looking at a weekly scale price chart, it's the end-of-week price action.

For example, gold, two charts, I future weekly and monthly and this is the month and March was the first time that it's closed strongly above the pattern boundary.

But the weekly signal came in March.

So the first week of March, if I'm not mistaken, was the weekly breakout signal.

It was a strong weekly candle.

So if you're looking and trading the weekly scale price action, you should have acted at the end of that week.

But from a very long-term asset allocation perspective, you can easily wait for that monthly close and position yourself accordingly.

Okay, so one of the things that I was doing was mostly focusing on the weekly scale charts when I was managing the funds.

The reason for that is turnover.

You cannot keep on acting on a daily and then if it fails, exit and then enter again.

So we were being punished by high turnover.

Due diligence that was being done by investors was mainly asking about the turnover. So if you have high turnover, entry and exit.

It is not considered to be good At least for our mandate.

It was not considered to be good.

So I used to wait for a weekly signal and the Weekly signal was my confirmation as I was waiting for the weekly signal you cannot act on a Friday in The UAE it was Thursday's end of the week.

You cannot act on a Friday because the size of the fund doesn't allow you to enter with that size at the end of the week.

So you have to scale in from Thursday or the day before if it becomes clear that it is a breakout.

It's way above the boundary.

So you spread your positioning into two days to three days and even two days plus Monday.

So I was looking at the weekly signals to have more conviction that this is a confirmed breakout.

That also can fail. There is no guarantee.

But at least you don't get whip-sawed with daily scale charts, let alone intraday.

So it's the scale that you're looking at.

The daily scale focuses on the end of the day.

The weekly scale will be the end of the week closing.

Rayner (1:11:41)

You mentioned that you couldn't enter all on a Friday, is it because the size of your fund is too big and if you entered one position on just one day, you would kind of like move the market, is that why?

Aksel (1:11:49)

Yeah, yeah. I was, the size, the size was basically could lock the stock limit up in that day, one position size.

Rayner (1:12:06)

Oh, that's crazy. {Laughs}

So yeah, I know that you scan many markets for opportunities from what I'm seeing right now. Crypto, Forex, commodities, etc.

How do you go about scanning so many markets for this type of different breakup opportunities?

Aksel (1:12:22)

I think, given that we've discussed the military service days, except the military service days, which was around six months, I don't think there has been a day that I haven't opened my Metastock charting platform.

I don't think there was a day, even when I'm sick, it's like I feel blind if I'm not looking at charts.

So for example, on social media or Bloomberg, or you hear, you see those charts, the news, the dollar is breaking out.

Then I have to open that dollar chart.

What is breaking now?

Then I realized that they were talking about an intraday price action.

Nothing is happening actually.

So every single day, I'm in front of my charting platform for at least two hours and probably I developed this capability because when you go through millions of charts over, since 2000.

Say 24 years now probably millions of charts have piled up in this so when you go through those charts you develop this pattern recognition capability.

I've seen it interestingly enough when I visit a city I pass through a street coffee shop and then I see that coffee shop or that street on a TV.

I said…We've been here, it was this.

So that interesting pattern recognition development happened in my brain probably over time.

When I look at the chart, I immediately focus on the right side and I know what I'm looking for.

I know the qualities that I'm looking for.

So that helps me to reduce the time.

That I scroll through a chart.

Maybe one second to two seconds is the time that I spend on a price chart.

I go through the list very quickly.

So let's say two to three hours per day is my review process.

Sometimes it exceeds, but I don't realize it.

So if you enjoy the process, even if it's four or five hours, it would probably feel like two hours.

Rayner (1:15:04)

That's dedication, man.

So, like, I mean, I'm just curious to hear what is your watchlist like.

Do you like to start with like all the stocks that start with capital A, then go down to BCDEFG to Z?

Is that how you go through the individual charts or stocks?

Aksel (1:15:21)

The platform that I'm using MetaStock has become more and more organized over the years.

I love their platform.

So they have a drop-down menu for each market so Nasdaq 3000 names New York Stock Exchange 4000 names.

They have hang sang index 40 names CAC 40 names so I added them all into a list and divided them into Asia, Europe, America's Middle East, and Africa.

So that's a group of stocks.

Right now, in my, for my timing, it's 11:16 in two hours, and Asia will close.

Asia will include Japan, Hong Kong, Singapore, Australia, and New Zealand stocks, uh, stocks that are above a market cap of $500 million.

Uh, that's my filtering.

So I'm going to sit down and spend a good one and a half hours, two hours to go through those quickly.

With my timing around seven o'clock, which is after my dinner time, Europe closes.

So I go through Europe and the Middle East, Africa stocks.

Then at the end of the day, around my time, 11:15, 11 o'clock US closes.

US is a larger universe and I don't want to stay too long.

So what I do is I try to go half of the US list around 11 and then the next morning I continue when I wake up basically from 6.30 6 o'clock till 8 o'clock I do my US studies as well.

So that's how I manage the review process.

These are daily, every day I do this and at the end of the week, on weekends, I do the same for weekly scale charts.

No end of the month.

I'm not doing that.

For weeklies, I'm doing the weekly as well.

Rayner (1:17:48)

So easily like each day is like thousands of charts each day. Each day you're just going through.

Aksel (1:17:49)

Yeah.

Rayner (1:17:50)

So if like you take two seconds for a chart, you go through a thousand charts, you know, it's like you can do the math, right?

How much time do you spend?

Yeah.

It's not going to be two seconds because you take time to go from one chart to some maybe some delay from the platform and stuff like that.

Wow. Wow.

All I can say is wow {Laughs}

Okay so my next question was about to ask, what's your take on trading pullback?

I think you talked about that earlier, if you wait for a pullback you're going to miss the move 27% of the time especially if it's a type 1 breakout.

So I think I'll skip that question unless you have something to add about that.

Do you have anything to add about you know?

Aksel (1:18:20)

Yeah, I think pullbacks if it's part of your strategy okay you have to know that at least from my statistics being a retest and rallying.

So this is your universe and if you're able to manage the risk-reward because it's gonna give you a better entry, right?

When you have a pullback.

It's also difficult to time the place where the pullback is gonna stop.

Sometimes the pullback is short.

Sometimes it comes to the pattern boundary.

So that waiting or that not getting filled and that trade is, uh, it's full of regrets.

I wish I put it here.

I wish I put my entry here.

So where do you exactly put that entry?

So waiting for that pullback, I felt, I feel like it's a lot of regrets.

The regrets are painful.

You don't want to have regrets.

You want to go with the flow execute that strategy and accept the result.

Rayner (1:19:37)

Since you know, you look at thousands of charts each day, I'm pretty sure more than one trading opportunity might come up.

Maybe they're both like, you know, rectangle patterns.

So how do you then decide which trade you want to take?

Aksel (1:19:50)

It's the rectangles mainly and then there the list drops down because the opportunity is what news event is pending.

I like to see breakouts that take place without any news effect.

So let's say the stock has an earning announcement in the next two, or three days and the stock is breaking out.

I would rather skip that because there will be a lot of volatility news announcements hitting the market.  

I like to go with those breakouts that have no events around them.

So either corporate actions or news announcements, so the list drops down.

So that's how I filter and mainly focus on the rectangles.

For shorter-term trading, the best are from two months to four to five months consolidations.

For the longer term, I like to take the weekly signals on weekly charts, which are year-long to two years long.

These are the longer-term patterns in that you can have wider stops and let go, giving room for that idea to develop.

But for a shorter term, you also have this filtering that comes from two months to four to five months breakouts.

The tighter the range, the better it is.

The value of that range should be ideally 10 to 15 percent of the price.

When those opportunities arise those are the higher conviction setups.

Rayner (1:22:12)

So when you said the range should be 10 to 15 percent of the price, let's kind of like make things simple.

Let's say the stock price is at $100, so the range should be anywhere between $85 to $100.

Aksel (1:22:21)

Exactly.

Rayner (1:22:24)

That kind of range, right? Exactly.

Because anything white, then the range gets ridiculously large.

Yeah. Okay.

Makes sense.

Okay.

What's your take on the concept of relative strength?

Is this something that you pay attention to?

Aksel (1:22:34) 

Relative strength, yes, I pay attention to.

I pay attention to and with my work with some of the funds for which I do consultancy, I also help them with relative performance charts.

Relative performance charts are valuable and Interestingly enough chart patents form on them as well, but you shouldn't exaggerate the Variety of the charts.

It's again rectangles and some short flag consolidations that you can act on or else trying to find exotic chart patterns on relative performance is a little bit overstretched.

So what I used to do is at the time of management of the funds, I had the denominator as the index, MSCI UAE index.

So all stocks relative to the benchmark I had to go through to see which stocks are outperforming the benchmark, and which stocks are underperforming.

So you cannot go against the tide.

It's the bigger picture.

So let's say right now you look at Nasdaq versus Russell, Nasdaq is outperforming.

So the tech stocks are where the action is happening.

So it's maybe better if you're a top-down guy, you would be looking at the tech stocks versus the Russell names.

So relative performance is important and it can be utilized in different strategies as well I enjoy looking at them because they are pure price charts.

It's like the Euro versus the dollar, Microsoft versus Tesla. It's the same idea.

The same patterns can form the way an FX chart is forming.

Rayner (1:24:41)

Would you then like to use that and consider that as part of your trading?

For example, you notice kind of particular commodities A and B right?

They're both commodities.

Maybe A Commodity A, the relative strength is stronger compared to commodity B and maybe commodity B has a potential rectangle breakout happening as well and maybe for commodity A, the breakout has already occurred.

So would you consider buying the breakout on commodity B, knowing that in terms of relative strength, it's not as strong compared to commodity A?

Does that make sense?

Aksel (1:25:14)

Yeah, if I was applying a different strategy, I would have.

But at this point, it is too time-consuming to incorporate different tools and inputs into my decision-making.

Because I'm a pure momentum-based breakout strategy guy.

So for me in a group, let's say, I'm looking at European banks lately, the European banks are the nice move.

Let's say I spot 10 different European banks, okay?

For me, the most important signal is the first signal.

The one that breaks out first, will be the strongest.

So I go with that.

I don't wait just because HSBC has better fundamentals.

I don't wait for HSBC to break out when ING is breaking out or Unicredit is breaking out.

The breakout signal matters the most for me and when I'm looking at those European banks, just doing relative performance between each one of them is super time-consuming, but it can be done.

I've done it in the past.

I'm still helping some funds with the consultancy to look at relative performance and I can say that it's an important component that you can take into consideration to capture longer-term or slightly longer-term movements between stocks, which one to prefer.

Rayner (1:27:05)

But for yourself, because to keep things simple, you just simply go along the first breakout and just keep things simple as it is.

Aksel (1:27:11)

Yeah.

Rayner (1:27:12)

So I think another thing that from what I've gathered is that you love trading rectangles and also you look at the 200 period moving average to kind of define the long-term trend.

So price is above the 200 MA, the trend is up, and you buy the rectangle, that's good. So what about... So am I right then to say that...

The stock market usually is more in a long-term uptrend, it's more bullish than bearish.

So most of your trades, I guess, are more long than short.

Aksel (1:27:41)

Yeah, yeah.

Long ideas are probably 80% of all the signals so far.

We had two different years, 2018 and 2020 during COVID, when markets tanked and when there was a V reversal, I failed badly.

Okay, I am not able to capture V reversals because I'm not a bottom picker.

I like to see stocks rebound, form some kind of a base, and then start a new trend.

So at that part, I'm lost.

What I do is I try to immediately look at other opportunities that can give me the upside when the markets are having a V reversal.

So basically...

The 200-day moving average, the 200-day moving average is very helpful in identifying those.

So in 2018 and 2020, the MSCI All Country World Index, which is the benchmark that I'm looking at gives me the overall perspective for global equities because I'm also looking at emerging market stocks.

Sometimes there are some frontier equities that I future.

So the MSAL Country World Index, with its 200-day moving average, when it falls below the 200-day average, and the market crashes or collapses, you start seeing bearish chart patterns.

I was able to capture maybe 10 to 15% of the ideas as bearish setups.

But mostly it's been bullish setups and I can say 80% were long ideas from the classical chart patterns.

But that doesn't mean that if stock markets enter into a bear market and stay in a bear market next five to six years, we're not going to see bearish chart patterns.

On the contrary, there will be bearish chart patterns developing.

You just need an established trend to see more and more at the end of the day are not magic, are not voodoo, or they are consolidation periods, okay?

So when stocks consolidate, they form one of those patterns.

It's either a rectangle or ascending triangle or head and shoulder continuation and they all tell the same thing.

After this consolidation, a trend might develop and your job is to capture that trend to be able to capture that trend, you first need to identify the consolidation.

If you don't know what the stage of the market is, you will not be able to define the trend period or the following trend period.

So chart pattern is helping us to identify that consolidation period.

It's just giving it a name.

Rayner (1:31:09)

So I'm going to backtrack a little bit here and maybe talk about consolidation rectangles.

So I want to know how do you draw these boundaries.

Because not always the chart, the price will just the exact sense, rebound.

Sometimes it might exceed, and sometimes it might not even touch that level.

So how do you then connect the dots?

How do you draw that horizontal line on your chart?

What's your approach?

Aksel (1:31:30)

It's a little bit harder than a science.

I'm applying the best-fit principle and trying to touch as many points as possible on the price chart and get close as much as possible to that minor high or minor low.

So that's how I'm drawing the boundaries.

Rayner (1:31:58)

Am I right to say that there will be times when if the boundary isn't as needed to write the word need as you like you just ignore it and move on to the next…

Aksel (1:32:08)

Ignore ignore yes ignore and move.

Rayner (1:32:09)

Okay

Aksel (1:32:09)

I'm not bound with uh with that specific opportunity that's the that's the good part about uh having a wide universe and a blank sheet.

Rayner (1:32:23)

Yeah, that's the advantage of looking at thousands of charts each day. {Laughs}

Aksel (1:32:24)

Yeah, you can you can look at another opportunity that has the perfect boundary and act on that.

Rayner (1:32:33) 

 Okay, and maybe to touch on risk management, how do you then manage your risk?

I think earlier you talked about setting stops and targets, but maybe in terms of percentage risks or maybe having a portfolio of 10, or 20 stocks, is there like a limit, a cap to how many stocks or positions you'll be in at any one point in time?

Aksel (1:32:50)

Well, with the short-term strategy that I'm applying for my own, a maximum of five to six with 1% of AUM at risk.

This doesn't mean six of them stay open.

Some of them reach price targets, some of them get triggered and you have to get out.

But mostly not more than six open ideas at a time, which puts you around four to 5% value at risk.

At any point in time.

Rayner (1:33:36)

So if the worst thing happens, just boom, right?

5% max loss, that's it.

Aksel (1:33:40)

Sometimes not exactly because some stocks open with a gap down, but also there are gap-up openings as well.

So low or large numbers take care of it over the long-term that bad things can happen, but good things can happen as well on the upside where you haven't measured.

That is gifted to you like the way a gap down happens but it nets out with hundreds of ideas.

Rayner (1:34:18)

Based on your maybe experience or data that you have, do you find that in the stocks that you hold, the gap up, occurs more often than the gap down?

Since you're trading the direction of the trend?

Aksel (1:34:28)

I think experience over four or five years, I would say equal amount of times I've experienced.

I've experienced some nice surprises on the upside and some nasty surprises on the downside as well.

Rayner (1:34:53)

When the market is open, so I'm guessing your stops, you then would put the stops with your brokerage or is it more of a mental stop once the target is reached?

No, no, it's always at the market.

The stops have to be always on the market.

Okay, got it.

Maybe just to move on and talk a little bit about crypto, right, because you do share quite a few crypto charts.

What's your take?

The crypto markets maybe in general?

Aksel (1:35:18)

Crypto markets are interesting.

So many tickers out there.

Rayner (1:35:29)

Yes.

Aksel (1:35:29)

It's like stocks that go on IPO and companies eventually, go bankrupt, and they get delisted.

I have so many tickers that got delisted in the crypto space.

So, It's another instrument of speculation.

That's what I'm seeing.

Some are gonna survive and become a de-think, which is gonna be part of the next-gen, probably currency or the financial medium that we get involved in.

But most of them are going to be just the periphery speculation instrument.

That's how I'm seeing it.

But what crypto created is easy access for the general crowd to one, open an account.

Opening an account is super easy, right?

With the camera recognition, you're able to open an account deposit money, and trade cryptos.

The second is that it allowed the crowd to get involved in financial instruments and have the possibility of making money or losing money.

Today you cannot even open a bank account in that short period, which is a much more established institution or a brokerage account.

You have to go through so many due diligence and checks and so on.

So its easy access is helping it spread widely and fast as well.

When I share a crypto chart It gets 10-15 times more likes in social media than a stock chart and a stock chart is not a simple stock chart.

It's sometimes Tesla, but a FET US dollar crypto chart is getting 300 likes versus a Tesla with a hundred likes.

The involvement in crypto is massive.

That's what I'm seeing right now.

Rayner (1:38:09)

Because crypto is quite a new market compared to established markets like the S&P, and Nasdaq.

So do you find that maybe breakouts in these markets tend to be more reliable in that sense?

Aksel (1:38:20)

Yes, it's momentum-driven, less fundamentals.

It reminds me of my early days in the UAE, where companies were not publishing financial statements every quarter.

You used to wait, there were delays, and so on.

So even the fundamental fund managers had to rely on technical signals to manage certain positions.

So fundamental information was limited.

So it was mostly momentum-driven and psychology-driven.

In the crypto market, I'm seeing it similar.

Except probably Bitcoin or ETH which has a story.

Yeah.

So mostly it is, it's momentum driven.

I'm seeing, and the percentage moves also show that per day.

Rayner (1:39:27)

I was just thinking too, so earlier you talked about your short-term trading, at most you hold I think six positions, but I forgot to ask, what about your long-term trading or investments?

How do you then manage your risk in that aspect?

Aksel (1:39:38)

Long-term I like to go with more illiquid assets.

I'm diversifying my assets into gold, real estate, and a larger portfolio of passive income-generating assets.

So the trading side is not a huge part, but just enough to generate some return, and other parts are more tied to passive income-generating assets. I have had some success over the past couple of years in real estate.

It's probably interesting that a stock trader or somebody who has managed funds that haven't held the assets physically is looking for more physical assets to balance his portfolio.

So I like the physical aspect of things.

To see the real estate, to see its presence.

Rayner (1:41:08)

Let's talk about real estate then, right?

So is it like real estate, where do you invest?

Is it areas of your expertise overseas, local, etc?

Aksel (1:41:17)

Real estate is the place where I live basically.

I never look at real estate as an investment, but more like would I wanna live in this place?

That's my initial motivation.

I've realized that over the past six, or seven years, the real estate that I got involved in Bulgaria, Eastern European market, some in Greece as well, which is a closed market, both have been in resorts.

So very much tied to the economy and the economy is booming.

If you look at the stocks of Airbnb, booking.com, travel companies, and leisure companies, their stocks are booming.

So the economy is booming.

There is inflation and those assets have tripled and price over the past four to five years from the time that I got involved.

Bear in mind they're not big-ticket purchases so I've realized that smaller units are more in demand because today's family structures have four or five-bedroom places versus they're happy with a small family, two-bedroom, one-bedroom units, and houses.

So those assets have picked up more, I feel like in price versus large properties.

That's my experience in this region.

Rayner (1:43:36)

So from what I'm hearing, you know, you would want to buy real estate places that you want to live in and ideally kind of like the smaller size units, right?

Because of the family structure.

Aksel (1:43:45)

Yeah. I like to see, I like to feel the market because I don't, I don't want to go and invest in Hong Kong right now.

Okay. Real estate, which I have no idea about.

What I'm seeing, I'm comfortable with.

I want to breathe that market's momentum.

I want to see the infrastructure improvements and the developments that are taking place in that place.

You go on vacation, you go see the improvements and you have a feeling of the place.

So those are the places that I feel comfortable placing my investments.

Rayner (1:44:28)

Is it a similar philosophy as breakout trading?

You want to see momentum going on around that place before you kind of like...

Aksel (1:44:34)

Looks like, yeah.

Sort of. Okay.

You want to see the confirmation.

You want to see...

Rayner (1:44:43)

So you're not so much of a person of like, let's say…

“Oh, there's a financial crisis, you know, real estate prices are low, let's go in and buy some stuff”

You're not kind of value investing per se, but more of like, you know, while things are doing well, let's get in at this, you know, price when things are looking good.

Aksel (1:44:56)

Uh, yeah sort of but also let's be fair because uh, I got lucky with uh with some of my uh Investments here in Bulgaria uh I I saw the opportunity, and uh, this probably is because of the places that I've been to that I lived in different places.

I've seen that there is an opportunity that people are not seeing it.

Uh, and, uh, it ended up being the bottom.

Hmm. Um, so that nobody wanted to touch right before COVID and COVID even, uh, made things more exciting because, uh, the place that I'm right now is away from cities.

So people rushed out of cities to the suburbs and people started valuing life outside of cities, which gave them more freedom.

The home office concept also helped to push the prices of suburban living.

Rayner (1:46:26)

So now that prices are like, you know, higher compared to where you bought them, do you have plans to exit those long-term trades or is it kind of like continue holding?

Aksel (1:46:35)

I think continue holding because they are generating passive income and it's always good to have passive income-generating assets in your holdings.

They pay the bills and keep you comfortable while you're trading.

So that's it.

Right now I don't have plans to sell prices are really low in Bulgaria, especially in this part of the country.

I don't know how things were in Singapore or Asia, but for example, in Dubai, we're talking about prices of $2,500 to $3,000 per square meter.

We were at 300 euro per square meter here and now prices have picked up to 1100 euro per square meter and there is probably potential of it going to 1500, 1600 euro per square meter.

It can easily go there because people start valuing quality of life differently.

As businesses, as the concept of businesses change, becoming more and more online, education is becoming more and more online people are not tied to cities anymore.

So they want the fresh air, they want the recreational activities.

So I feel like more and more outside of cities are gonna benefit from this.

Change of trends in AI and how we work.

How we work and how we study.

Rayner (1:48:48)

A very similar phenomenon has happened in Singapore as well.

I think COVID, we thought housing property prices would drop, but like you said… more people work from home, remote working.

Prices here actually soared to pretty high now.

So I think we talked about per square feet, you know, private properties about $1,000 per square feet.

I'm not sure what the conversion to a square meter, but a typical property here, a thousand square feet house you can expect to pay from you know between four hundred thousand to a million dollars and this public housing is not even private.

Private you're looking at seven figures and beyond over here so it's pretty crazy over here yeah.

Aksel (1:49:27)

Yeah I mean during an inflationary time this is an asset that's holding its value and increasing its value so it's it's by default that okay there is the dollar's inner value of the paper currencies are going down, so the assets are holding its value.

Rayner (1:49:55)

So is that the same reason why you bought gold, you mentioned gold as well.

Aksel (1:50:50)

Yes, yes.

Those are the same reasons that I wanted to go into hard assets because of the value of the losing value of the currencies.

Rayner (1:50:19)

Yeah, the declining purchasing power.

Aksel (1:50:20)

Declining purchasing power.

Yeah.

Especially I saw the chart of- What you were buying, you're not able to fill your basket in a store with what you were paying two years ago.

No way.

Rayner (1:50:36)

I think you posted the chart of the dollar against the Turkish lira a few times.

It is crazy.

That's- That's ridiculous.

Aksel (1:50:39)

Unfortunate, very unfortunate.

Rayner (1:50:40)

What about Bitcoin, I'm curious since Bitcoin is kind of like a digital goal in that sense.

Is this something that you hold as well?

Aksel (1:50:51)

Cryptocurrencies are an interesting field.

It has its regulations.

So with the truly regulated instruments, I like to get involved, which is being available now more and more.

So as long as it is regulated, given the countries that we're living in everywhere have their regulations and limitations, still the institutional system is not super comfortable with the instrument itself.

They're going to become more comfortable with regulatory leeways and allowances in different countries, I guess.

Rayner (1:51:51)

I understand.

Now let's move on to the closing section, shall we?

I'd like to hear maybe more about TechCharts, which is the educational company that you founded.

Aksel (1:51:01)

Yeah, so TechCharts started in 2016 as an educational service.

So what I have taught is that I have developed this ability to look at charts cleanly and I realized that so many people who are starting in technical analysis and charting have the possibility of losing a couple of years the way I did.

Moving from one concept to another, hoping of hoping on a different strategy, looking at things differently, and figuring out.

So I said — I can easily help people to shortcut at least two to three years of their journey and start with a clean perspective of what is working more often than not.

That was my initial motivation because I worked with so many fundamental guys and I believe that over the years that I worked with them, I've changed their perspective towards classical charting and charting itself.

So a fundamental colleague of mine would sit in front of a Bloomberg screen with all the codes, and tickers, and then he would have a daily chart open on a portfolio that he's managing and rebalancing every quarter.

So I used to say, why are you looking at the daily chart?

You should be looking at a weekly chart for this stock, what it is doing and I explained to them the trend periods and the consolidations, the most basic sense.

I realized that there is a lot of awakening happening there.

I think with this service, I helped many people to have that awakening and to move faster to the next stage of their journey where they can start applying the risk management and psychology of things and learn trading by applying it, by doing it.

Because I have a belief that you cannot teach trading.

You can educate a doctor, you can educate an engineer, but that person needs to go out and experience it themselves.

A super famous doctor and an ordinary doctor, the difference is that it's the same as a super trader and an ordinary trader.

There will always be this difference. You, even the Turtle traders were given the rules and how to apply them, but every one of them ended up different.

So it's that second part of that journey that they can start focusing on by accelerating this trial and error in the charting part that I want to help.

 I think it's been helpful for many people.

Meanwhile Uh, let's not forget I'm cooking food and I'm serving it so the ideas that I'm generating.

There can be 20-25 ideas and I might utilize five of them but 15 of them are going to go to the garbage or benefit some of the members.

So I decided that I could put out those ideas that I have found out as part of the membership service.

So there is the educational part and the application part, the signaling part of the service that has been helpful to many who don't have the time to go through those charts every day to put that two hours extra time or three hours extra time.

So I think it's been a win-win.

It keeps me more focused and disciplined when I write things when I compile things together, I stay more focused. It helps me to organize myself.

It helps the members also to get something in return where first they shorten their time of research, second, they shorten their time of journey in reading charts and becoming more capable of looking at things.

Entered by By giving them these educational videos educational aspects of things or how things worked in the past and how things can move in the future a lot of people think that with the development of the financial markets Classical charting stopped working.

But when I put a chart from the 1940s Edwards and McGee and put a chart from the crypto market today, it's shocking to see that.

They follow the same pattern in totally different markets for almost 60 years, 70 years, or even a century-long chart having the same pattern as today.

So that's like awakening for a lot of people.

It makes them more interested in researching the field, which I think I've been able to achieve so far.

Rayner (1:58:14)

Would you say then since breakouts tend to work better in lesser popular names, less liquid markets, so chart patterns or classical chart patterns in general, would you find better opportunities in the more obscure markets, compared to those which are very, that a lot of people pay attention to.

So I guess for a new trader who maybe wants to find a better chance of success, focus on these obscure markets rather than the very popular ones.

I wouldn't say that because like I said, for example, on Microsoft, you might not find that perfect rectangle forming every other month or in a year, three times or four times in a year.

But once in a year, you might find it in a very crowded stock like that.

But in less focused names you might find that set up more frequently.

That's what I can say because I've seen very liquid names having perfect chart patterns.

This doesn't mean they don't form at all but they are less frequent to come across.

They are probably more like the pattern boundaries could be more violated than a less crowded stock.

Rayner (1:59:35)

Okay, so just to clarify, when you talk about frequency, maybe let's say — A very popular stock, maybe over five years, that tradable pattern might happen one time, whereas not so popular stock over five years that tradable pattern might appear maybe five or six times.

Is that what you mean by the frequency?

Aksel (1:59:51)

Exactly.

Yeah.

Rayner (1:59:52)

Got it.

Okay.

Aksel (1:59:53)

But then you can go and take that Microsoft and then take that Tesla, take that ExxonMobil, take the other name, and then increase those patterns forming.

So you still have that option.

That's why I always advise you to widen your research universe.

Don't look at just Facebook.

Don't look at just a Tesla name.

Look at a wider universe.

Go a little bit more outside of the usual names to be able to find more of these setups.

Rayner (2:00:31)

That makes sense.

Also, I think on your website, I saw that there is this kind of like a tagline that says that…In association with the factor trading, which is, you know, from Peter Brandt.

So that's kind of like the arrangement or the link down there?

Aksel (2:00:47)

So the link is that Peter has been a mentor. In 2011, I read his Diary of a Professional Commodity Trader.

Basically, in 2007, I started applying the classical charting principles to the UAE markets and then I started seeing the success then in 2011 I started reading Peter's book and who has been applying it to the commodity markets and it all clicked.

We interacted and then I joined his trader's boot camp in 2014

We started thinking of doing this bigger library of classical chart patterns together.

So all this data that goes into this database that I'm creating about classical chart patterns will hopefully become part of a bigger thing in the future and part of a go-to source in classical charting.

So basically in 2016 when we launched this TechCharts membership service, our motivation was to focus on equities and try to collect as many data points as possible that we can study in the future and even apply different risk management to it to see what can come out of it.

So this is our association with him, working on this together and making it a much larger classical chart pattern library.

Rayner (2:02:47)

Okay, got it.

Is there anything right that you wish to add or talk about that we didn't cover in today's session?

Aksel (2:02:57)

About the chart patterns, I want to discuss them because we've touched on rectangles.

Our brains have the capability of finding out limited patterns in one shot.

If you force yourself on let's say one stock to find eight or ten different chart patterns, you will be mistaken, you will be misled, and find things that don't exist.

So I want to close this podcast session by giving a quick tip for people who are starting their journey to limit the number of patterns that they're looking for and increase the number of instruments.

So let's say they focus on two to three patterns.

Let's say a rectangle or cup with a handle.

This cup with a handle is the most popular lately because of the volatility contraction pattern that has been discussed in different books.

So let's say you look at a rectangle and cup with a handle, but look at a thousand names.

That cup with handle even limit.

The period that you're looking for, like let's say four to five months of cup pretend.

Yes, the opportunities will be limited, but you will find, that your eye will start looking for that pattern constantly, and you will be able to find the patterns that are valid on the price chart.

Rather than opening one chart and trying to focus and say…

Is there a symmetrical triangle?

Is there a wedge here?

Is there a trend line here?

Is there a head and shoulder?

The list goes on and it becomes confusing and the best actually, what I found is to limit the patterns because we cannot process that much information at one look.

Rayner (2:05:22)

This kind of reminds me of a... I'm not sure what's the exact term but it's something along the lines of the reticular activation system where your brain starts to get very familiar with the pattern that you are seeing and then it kind of triggers whenever such patterns appear.

It's kind of like muscle, you have to keep training it to develop that system, yeah?

Which is what you've done over the years, right?

Thousands of charges stay each day and now whenever you see a pattern, you know, that's it, right?

If not, you move on to something else.

Aksel (2:05:47)

Yeah, I even suggest people print out the patterns that they have traded successfully.

That is a textbook rectangle, textbook head, and shoulder, and print it and post it on their desktop and keep an eye on that.

Keep an eye on that to see if what they're looking at resembles the same pattern.

Be it the period, be it the depth.

Soon, artificial intelligence software will be able to capture those.

I'm 100% sure that we're going in that direction.

But until that happens, we're still alone in this process of finding the patterns that we want to trade and act on them.

Rayner (2:06:38)

Awesome and where can traders find you, right?

If they want to connect with you.

Aksel (2:06:43)

I'm on Twitter, TechCharts, online I'm on TechCharts.net and YouTube videos are also available with the TechCharts extension.

So if they go to my Twitter profile or X profile TechCharts, they will be able to see the links for YouTube and my website as well.

Rayner (2:07:13)

I highly recommend right, traders do so because your Twitter feed has one of the cleanest right classical chart pattern feeds that I've come across.

So you know, traders should check your Twitter feed or X feed out.

Yes.

So thank you so much for your time, Aksel.

I appreciate it.

It has been a fantastic session, right?

Speaking with you.

Aksel (2:07:30)

Thanks, Rayner.

Same here.

I appreciate having me on your show.