Pattern Day Trade Rule
I would suggest following your quote and having a read of the web page supplied, that buys then sells or sells short then buys (the same security on the same day) four or more times in five business days, ... So it is a two way transaction that counts as 'one'.
"For every buyer there is a seller. That rule refers to actual (historical) trades. It doesn't apply to ""wannabees."" Suppose there are buyers for 2,000 shares and sellers for only 1,000 at a given price, P. Some of those buyers will raise their ""bid"" (the indication of the price they are willing to pay) above P so that the sellers of the 1000 shares will fill their orders first  (""sold to the highest bidder""). The ones that don't do this will (probably) not get their orders filled. Suppose there are more sellers than buyers. Then some sellers will lower their ""offer"" price to attract buyers (and some sellers probably won't). At a low enough price, there will likely be a ""match"" between the total number of shares on sale, and shares on purchase orders." Speaking from stock market point of view, superficially, TA is similarly applicable to day trading, short term, medium term and long term. You may use different indicators in FX compared to the stock market, but I would expect they are largely the same types of things - direction indicators, momentum indicators, spread indicators, divergence indicators. The key thing with TA or even when trading anything, is that when you have developed a system, that you back test it, to prove that it will work in bear, bull and stagnant markets. I have simple systems that are fine in strong bull markets but really poor in stagnant markets. Also have a trading plan. Know when you are going to exit and enter your trades, what criteria and what position size. Understand how much you are risking on each trade and actively manage your risk. I urge caution over your statement ... one weakened by parting the political union but ought to bounce back ... We (my UK based IT business) have already lost two potential clients due to Brexit. These companies are in FinServ and have no idea of what is going to happen, so I would respectfully suggest that you may have less knowledge than professionals, who deal in currency and property ... but one premise of TA is that you let the chart tell you what is happening. In any case trade well, and with a plan! The dynamics of different contracts and liquidity can be quite different on the last day on the month and for intraday trade make sure you use bid-ask data as opposed to historical trades.  I'm not saying whether it works or not, but im just giving you ideas to improve your testing. I did a historical analysis a few years back of all well-known candlestick patterns against my database of 5 years worth of 1-minute resolution data of all FTSE100 shares.  There wasn't a single pattern that showed even a 1% gain with 60% reliability.  Unfortunately I don't have spread data other than for a handful of days where I recorded live prices rather than minutely summaries, but my suspicion is that most of the time you wouldn't even earn back the spread on such a trade. Start by going onto google.com/finance and click through every publicly traded Fortune 500 company. Click on all their charts and look through their graphs for any patters. There will almost always be a pattern even if it is vague and fairly unpredictable. Then look for any jumps or drops in price. Look for the reason of the jump or drop. It could range commonly from news, lay off announcements, acquisitions, etc or just moving along with the market direction for the day. Looking at each stock is key because every stock has its own pattern. Trying to understand the market at a whole is quite impossible, but when you narrow it down to just one stock, it is much more doable. For practice, try updown.com(spent most of my time on it during high school) and create 10-100 accounts and use various techniques for each portfolio.   Just from that, you will have much more practice than the majority of traders. It is all very time consuming, but if you truly try on it, you will do better. I have to go(large market drop today, good time to buy).  I'll answer more questions later! the strategy is tested all the way to 97. how is the continuous series backadjusted? the emini is rolledover and Ratio back adjusted to the 2nd nearest contract, 9 days prior to expiration. since it is an intraday trade, the discrepancy to the real thing should be next to irrelevant. but comparing it to the spx could make it interesting.  what would be a good format to present the results ? jpeg? pdf ? Yes, exactly. VaR is just a single tailed confidence interval.  To go from model to strategy, you need to design some kind of indicator (i.e. when to buy and when to short or stay out). In practice, this will look like a large matrix with values ranging from -1 to 1 (corresponding to shorting and holding respectively) for each security and each day (or hour, or minute, or tick, etc.), which you then just multiply with the matrix of the stock returns. The resulting matrix will be your daily returns for each stock, you can then just row sum for daily returns of a portfolio, or calculate a cumulative product for cumulative returns.  A simple example of an indicator would be something like a value of 1 when the price of the stock is below the 30 day moving average, and 0 otherwise. You can use a battery of econometric models to design these indicators, but the rest of the strategy design is essentially the same, and it's *relatively* easy to build a one-size-fits-all back-testing code.  I'll try to edit this post later and link a blog that goes through some of the code.  Edit: [Here](http://www.signalplot.com/simple-machine-learning-model-trade-spy/) is a post that discusses implementing a simple ML strategy. You can ignore most of the content but if you go through the github, you'll see how the ML model is implemented as a strategy.  An even easier example can be found from [the github connected to this post](http://www.signalplot.com/how-to-measure-the-performance-of-a-trading-strategy/), where the author is just using a totally arbitrary signal. As you can see, deriving a signal can be a ton of work, but once you have, actually simulating the strategy can be done in just a few lines of code.  Hopefully the author won't mind me linking his page here, but I find his coding style to be very clean and good for educational purposes. There are Patterns inside of Patterns. You will see short term patterns (flags / pennants) inside of long term patterns (trend lines, channels) and typically you want to trade those short term patterns in line with the direction of the long term pattern.  Take a look at the attached chart of GPN. I would like to recommend two excellent books on Chart Patterns. Richard W. Schabacker book he wrote in the 1930's. It is the basis for modern technical pattern analysis.  Technical Analysis and Stock Market Profits  Peter Brandt Diary of a Professional Commodity Trader. He takes you through analysis and trades. This strategy is called trading the 'Golden Cross' if the 50 day SMA moves above the 200 day, or the 'Death Cross' when the 50 day SMA moves below the 200 day SMA. Long-term indicators carry more weight than shorter-term indicators, and this cross, in a positive direction signals a change in momentum of the stock. You will not catch the very bottom using this method, but there is a better chance that you will catch a move near the beginning of a longer-term trend. Golden Cross Information - Zacks To answer your original question: There is proof out there. Here is a paper from the Federal Reserve Bank of St. Louis that might be worth a read.  It has a lot of references to other publications that might help answer your question(s) about TA.  You can probably read the whole article then research some of the other ones listed there to come up with a conclusion.  Below are some excerpts:  Abstract: This article introduces the subject of technical analysis in the foreign exchange market, with emphasis on its importance for questions of market efficiency.  “Technicians” view their craft, the study of price patterns, as exploiting traders’ psychological regularities.  The literature on technical analysis has established that simple technical trading rules on dollar exchange rates provided 15 years of positive, risk-adjusted returns during the 1970s and 80s before those returns were extinguished.  More recently, more complex and less studied rules have produced    more modest returns for a similar length of time.  Conventional explanations that rely on risk adjustment and/or central bank intervention do not plausibly justify the observed excess returns from following simple technical trading rules.  Psychological biases, however, could contribute to the profitability of these rules. We view the observed pattern of excess returns to technical trading rules as being consistent with an adaptive markets view of the world.    and  The widespread use of technical analysis in foreign exchange (and   other) markets is puzzling because it implies  that either traders are   irrationally making decisions on useless information or that past   prices contain useful  information for trading.  The latter   possibility would contradict the “efficient markets hypothesis,”   which holds that  no trading strategy should be able to generate   unusual profits on publicly available information—such as past    prices—except by bearing unusual risk. And the observed  level of   risk-adjusted profitability measures market  (in)efficiency. Therefore   much research effort has been directed toward determining whether   technical analysis is  indeed profitable or not. One of the earliest   studies, by Fama and Blume (1966), found no evidence that a particular   class of TTRs could earn abnormal profits in the stock market.   However, more recent research by Brock,  Lakonishok and LeBaron (1992)   and Sullivan, Timmermann an d White (1999) has provided contrary   evidence. And  many studies of the foreign exchange market have found   evidence that TTRs can generate persistent profits (Poole  6  (1967),   Dooley and Shafer (1984), Sweeney (1986), Levich and Thomas (1993),   Neely, Weller and Dittmar (1997),  Gençay (1999), Lee, Gleason and   Mathur (2001) and Martin (2001)). "The American ""Security Exchange  Commission"" has imposed a rule upon all stock trading accounts. This rule is ""Regulation-T"". This rule specifies that stock trading accounts must be permitted three days after the termination of a trade to settle the account. This is just fancy lingo to justify the guarantee that the funds are either transferred out of your account to another persons  (the person that made money), or the money flows into your account.  A ""Day Trader's"" account avoids the hassle because you're borrowing money from your broker to trade with and circumvent Reg-T.  It's technically not how long you hold the trade that determines if you're a day trader, or not. It's your accounts liquidity and your credit worthiness." According to Regulation T, you can make as many day trade (round trip) stock purchases using a cash account as long as you have the funds to cover each and every round trip sale. However, the funds generated from the sales cannot be used again to purchase new stocks until the settlement period (T-2 or T-3) is over. For example, say you have $10000 dollars in your cash account and no securities. You buy 1000 shares of XYZ stock in the morning at one dollar per share and you sell the stock 30 minutes later because it went up say by 50 cents. According to Regulation T, you cannot use the money generated from the sale of your 1000 shares until after the settlement date. However, you can use the remaining $9000 dollars in your account to execute other trades just as the first trade. You can do this as many times as you want as long as you have funds available to pay for the transaction the same day it's executed. The only thing to worry about and that isn't clear, is, what happens if you perform this action more than 3 times in a week? Does it mean that your cash account now becomes a margin account subject to margin account rules because you executed more than three round trip trades in a five day rolling period? Very common question. There is no any rule of thumb. This solely depends on your trading strategy. I will share my own experience. My day starts with the daily chart, if I have a signal, either I open my position or I check 30 minute chart to make sure that it won't go too much against my trade. and I open my position. If I am waiting for the signal the minimum timeframe is 4 hours for me. I use 30 minutes to find the best time to enter the market. So, this is totally something special for my trading strategy, that is why those things can change based on the different strategies. I also check weekly and monthly charts to confirm trend. I have been busy with forex since 2007 and I am a verified investor on etoro At the end, I never use 1,5,15,60 minute charts as they are against my strategy. "In summary: In long form: Spreads and shorts are not allowed in cash accounts, except for covered options. Brokers will allow clients to roll option positions in a single transaction, which look like spreads, but these are not actually ""sell to open"" transactions. ""Sell to open"" is forbidden in cash accounts. Short positions from closing the long half of a covered trade are verboten. Day-trading is allowed in both margin and cash accounts. However, ""pattern day-trading"" only applies to margin accounts, and requires a minimum account balance of $25,000. Cash accounts are free to buy and sell the same security on the same day over and over, provided that there is sufficient buying power to pay for opening a new position. Since proceeds are held for both stock and option sales in a cash account, that means buying power available at the start of the day will drop with each purchase and not rise again until settlement. Unsettled funds are available immediately within margin accounts, without restriction. In cash accounts, using unsettled funds to purchase securities will require you to hold the new position until funds settle -- otherwise your account will be blocked for ""free-riding"". Legally, you can buy securities in a cash account without available cash on deposit with the broker, but most brokers don't allow this, and some will aggressively liquidate any position that you are somehow able to enter for which you didn't have available cash already on deposit. In a margin account, margin can help gloss over the few days between purchase and deposit, allowing you to be somewhat more aggressive in investing funds. A margin account will allow you to make an investment if you feel the opportunity is right before requiring you to deposit the funds. See a great opportunity? With sufficient margin, you can open the trade immediately and then run to the bank to deposit funds, rather than being stuck waiting for funds to be credited to your account. Margin accounts might show up on your credit report. The possibility of losing more than you invested, having positions liquidated when you least expect it, your broker doing possibly stupid things in order to close out an over-margined account, and other consequences are all very serious risks of margin accounts. Although you mentioned awareness of this issue, any answer is not complete with mentioning those risks." There are lots of good answers on here already.  There are actually lots of answers for this question.  Lots.  I have years of experience on the exchange feed side and there are hundreds and thousands of variables.   All of these variables are funneled into systems owned by large financial institutions (I used to manage these - and only a few companies in the world do this so not hard to guess who I work for).  Their computers then make trades based on all of these variables and equations.  There are variables as whacky as how many times was a company mentioned in an aggregate news feed down to your basic company financials.  But if there is a way to measure a company (or to just guess) there is an equation for it plugged into a super computer at a big bank. Now there are two important factors on why you see this mad dash in the morning: Now most of the rest of the day is also automated trades but by the time you are an hour into market open the computers for the most part have fulfilled their calendar buys.  Everyone else's answer is right too.  There is futures contracts that change, global exchange info changes, options expiring, basic news, whatever but all of these are amplified by the calendar day changing.