Claw Pattern Trading Strategy — What Is It? (Backtest)
Last Updated on April 18, 2023
Some price patterns are more frequent in certain markets due to the volatility in such markets. Seen mostly on Bitcoin charts, the claw pattern is one such pattern. But what is the claw pattern trading strategy?
The claw pattern is a unique price consolidation pattern that is used to identify long-term trends in the Bitcoin market. The pattern was discovered by Trading Strategy Guides who used it to create its proprietary Bitcoin Signal indicator. According to the developers, the claw pattern is a low-risk pattern with high rewards.
In this post, we take a look at the claw pattern trading strategy, and at the end of the article, we make a backtest.
What is the claw pattern?
Discovered by Trading Strategy Guides, the claw pattern is a unique price consolidation pattern that is used to identify long-term trends in the Bitcoin market. According to the developers, the claw pattern is a low-risk pattern with high rewards. Trading Strategy Guides keeps the exact description of the claw pattern secret and used it to create its proprietary Bitcoin Signal indicator, which people can subscribe to.
The Bitcoin Signal indicator is a trend channel that signals when there is a breakout of a specific pattern of price consolidation termed the claw pattern. According to Trading Strategy Guides, the indicator works best in H1 or higher timeframes, which are where there are sustained trends. The indicator only gives buy signals, as it was developed when Bitcoin was in a long uptrend.
The group claims that the indicator has been back-tested and shown to be profitable:
Everything you need to successfully trade the Bitcoin claw pattern, starting from your entry point and ending with your exit point is going to be supplied by our proprietary indicator. Like any other easy bitcoin trading pattern, all you need to do is to be ready to pull the trigger when the Bitcoin signal indicator will issue a buy alert.
What are the claw pattern rules?
The Bitcoin Signal indicator is available for the Meta Trader 4, Meta Trader 5, and Tradingview platforms. Here are the rules the group specified for using the indicator:
Rule #1: Wait for the Bitcoin Signal indicator to issue an Up-green arrow, which indicates a buy signal: The indicator has a pop-up alert feature that alerts you whenever a buy signal is found in the market.
Rule #2: Make the Bitcoin trend visible by coloring the candle: To see the trend more clearly, the group recommends using the Colored Candles feature in the indicator settings. This will paint both bullish and bearish candles the same color when the price is trading above the channel.
Rule #3: Put protective stop loss below the Bitcoin claw pattern: You must place a stop loss below the pattern to protect your account when the trade fails. You can set this from the indicator settings. You can also set the trail your stop loss option so that if your trade never reached your target before the market turns, you will at least lock in some profits.
Rule #4: Set your profit target at 3x your stop loss or take profit when the price breaks below the Bitcoin signal channel: Once the price breaks below the Bitcoin signal channel, it is time to close your position. If you set a trailing stop loss, the indicator will close the trade for you. You then wait for another opportunity to go long again to catch the next up-swing wave.
Claw pattern trading strategy (backtest and example)
Unfortunately, we are not able to make a meaningful backtest of the Claw pattern trading strategy. Any backtest requires strict trading rules and some additional settings, but because this is a very subjective pattern, we are not able to jot down what is needed. It’s simply too many rules that are needed.
Because of the lack of objectivity, we believe traders are better off NOT trading on classical chart patterns (or technical analysis in general). Why spend time on something that is mostly based on subjectivity and not any objective standards? How do you know a pattern is profitable if you have not backtested it?
Backtesting is no sure thing, but at least you have an idea that something has worked in the past. If it has not worked in the past, you can skip it immediately. If you know how to backtest you can develop a portfolio of trading strategies pretty fast. There is no best trading strategy because you need many to smooth returns.
(If you are new to backtesting and it looks like a daunting task, you might be interested in our backtesting course.)
We believe you can get many trading ideas to form a trading strategy by looking at what we have to offer. We have hundreds of different trading strategies on this website – all of them backtested with strict trading rules. You find all our products in our shop.