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Regarding the systems, gross profits are high enough on some to warrant a mechanical trade, however, that is not the best application. Better systems do exist and I recommend further research using the most profitable patterns as the focus of the research. Patterns 5, 9, 12, 13, 21, 24, 25, 29, 30, 33, 36, 44, 45, 52 and 53 will provide a good start in system development.

Practical trading applications are to coordinate the patterns with support/resistance, angles and trendlines. An open on an important angle of support when a strong upward bias is indicated increases validity of support. Watch action around the open for confirmation of the bias before entering a trade.

Another application is to place stops to enter just above or below the open in the direction of the opening range breakout bias (see "Playing the Opening Range Breakout," Stocks & Commodities, Volume 6: Market Timing). This should be done early in the session to anticipate early (urgent) entry on the part of market participants. Early breakout entry usually results in a big move for the day.

The patterns also can be used to enter when a trend has been defined. Take pattern 48 — a buy after three up days, a lower day and a lower open — which reflects a strong up market with a one-day counter move. The lower open provides an excellent chance for low-risk entry. The objective is new highs for the move. Note the high percentage profit (63%). I have observed that the best profits in this pattern come mainly in strong uptrends. In trading ranges, the patterns aren't as profitable.

I do not use these systems methodically in my trading, but find them a useful starting point in system development. Increasing or narrowing daily ranges can be applied successfully to the basic close/open patterns to form some reliable systems. In fact, daily range differences relative to the previous day or days may be one of the most useful approaches I've found.

Toby Crabel is a CTA and AP with RB&H Commodities and a principal in Toby Crabel & Associates. A former trader at the CME and CBOT, he now edits Market Analytics, 30 S. Wacker Dr., Suite 1912, Chicago, IL 60606, (800) 621-2503, ext. 1410.