Find the Pattern with Better Trades
Below is a MRR and PLR article in category Finance -> subcategory Investing.
Find the Pattern for Better TradesSummary:
As a chartist and technical trader, my primary focus is identifying patterns. The fundamentals of straight-line analysis lay the groundwork for understanding market movements, while moving averages and range bands serve as supplementary observational tools. The art of straight-line charting has long been instrumental in defining patterns and setting targets. I believe that randomness cannot construct order; if something appears structured, it has been carefully arranged.
Article:
As a chartist and technical trader, I prioritize finding patterns as the initial step in analysis. Straight-line analysis remains a foundational tool, despite developments like moving averages and range bands. Straight-line charting has effectively defined patterns and set targets for a long time, emphasizing that structure is not coincidental.
Let me present a compelling study involving pattern trading, not of a single stock, but an entire index?"the NASDAQ. These insights were developed in real-time, charted during my Trader's Talk Live sessions with students. Our focus was to observe the transition from one trend to another, with lines drawn before patterns fully emerged. These lines didn’t dictate behavior but highlighted potential targets if patterns continued. Each pivot offered trading opportunities based on price reactions at key decision points.
On February 23rd, the index dropped to recent support, forming a lower top. We identified the support and noted its alignment with the long-term trend line. The following day, while support held, the index bounced off the trend line, stalling at a wedge pattern formed by descending tops and long-term support lines. Breaking out above indicated a target of 2155, while breaking support favored a downtrend.
The subsequent day saw the index fall to the support line, signaling the end of an uptrend that began in March 2003. This marked another Obvious Bracket Trade, with resistance lines defining the trend and showing attention to target points.
The double bounce on the support line set an upside target at about 2020, while downside targets aligned with sliding support lines or the 1900 price support. A major market gap down to 1900 confirmed recognition of this support area, reflecting a common return to previous rally points. Here, market sentiment was accurately tested, as major traders assessed if the market had exhausted its selloff.
News didn’t explain the ensuing three-day movement. As an analyst admitted, the reasons were unclear. However, savvy traders knew exactly when to ignite movement, choosing days when support levels aligned with trend analysis.
In our Trader Talk Live sessions, we tracked these developments, trading numerous stocks exhibiting similar patterns. Today, we reached the next target in just one hour. The market paused here, indicating traders' awareness of the limits of the current pattern. Whether the market decides to take profits depends on public sentiment and market dynamics.
Pattern analysis offers the most reliable method for understanding price action and market sentiment. While indicators like MACD, WRSI, and Stochs are useful, they support rather than dictate trading decisions. Patterns and price movements are paramount.
Candle sticks serve as a crucial tool, providing insights into market dynamics. Patterns dictate when we reach significant price points, supported by indicators to assess trader momentum and set criteria for trades. Armed with this information, traders anticipate market moves without speculation.
Professional traders do not rely on moving averages or oversold indicators. They understand market momentum and aim to guide the next market cycle. The presence of a pattern suggests substantial profit potential, even if it's not immediately visible.
The NASDAQ's price action over the last year is far from random. Structured patterns suggest intentionality behind market movements. While technical indicators have their merits, the market is consistently right. Our task is to identify patterns and adhere to them until they break.
Finally, understanding where the market will head remains uncertain, but key traders have their targets. Our role is to identify these targets and follow them. Remember, there’s no need for guesswork?"find the pattern, and it will guide you.
Ryan Litchfield with Better Trades
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