Chart patterns are frequently employed by traders, and short-term speculators, as a factor in the decision-making process of when to enter and exit points in trading.
A chartist is a trader who relies on technical analysis in trading and research by examining price charts and graphs.
A skillful chartist can look at a price chart and determine the trajectory of price action with greater accuracy than a toss of a coin.
“A chartist is a trader who relies on technical analysis in trading and research by examining price charts and graphs”
WEALTH TRAINING COMPANY
The psychology behind chart patterns is that traders behave predictably when support resistance prices are reached. They seek psychological numbers, round numbers as levels.
Moreover, because humans prefer routine and blindly follow trends like Lemmings, this creates momentum and predictable price patterns, which other traders exploit.
A caveat about chart patterns
When you take a trade that is the consensus of other players, profits tend to be low because price action already reflects the consensus.
Your most profitable trade is when everyone is wrong, and you get it right and buy the discount position.
So with this in mind, the traders high up the food chain, central bank traders, and their bank members know that if they can manipulate chart patterns, they can forecast market behavior and catch a monkey, a lemming.
“When you take a trade that is the consensus of other players, profits tend to be low because price action already reflects the consensus”
WEALTH TRAINING COMPANY
In other words, traders not part of the club need to look at chart patterns with a healthy dose of skepticism.
So ask yourselves, are these chart patterns the real deal, or am I being played? Chart patterns can sometimes be a bluff, like the bluff of a poker face player that dupes the other player into making a loss.
“Sometimes what determines a winner from a loser is the art of deception” – Wealth Training Company
Using chart patterns with other matrices
No technical analysis tool is valuable in isolation because you will need to determine whether the signal is a bluff, deception, or profitable signal.
Sometimes what determines a winner from a loser is the art of deception.
Yes, believe it or not, deception is everywhere. In fact, the more competitive the activity, the more deception will be deployed. There is the deceptive jab in boxing. The Chess gambit, where a player sacrifices a piece to obtain an advantageous board position, is another example of intellectual deception.
Warfare is jam-packed with deception, the Trojan horse in ancient times comes to mind. The natural beautiful world also has its share of deception.
Triantha occidentalis, with its dainty white flowers, appears attractive, but its sticky stem traps and makes a meal of tiny insects.
The naked ape uses deception when attracting a mate. Think of the female in a bar with dim lights, makeup, war paint, accentuating her best features, and clothes flattering her assets.
What are the most useful tradable chart patterns?
Check the 11 most essential chart stock patterns here.
The takeaway of this chart patterns piece is that chart patterns are useful in technical analysis, but you will need to use your discretion as to whether the signal it generates is genuine or a bluff.
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