Chart Pattern Recognition
by John Lansing 03/18/09
Chart pattern recognition by definition is a grouping of "sticks on a grid" that display "sentiment," which has an outcome on the direction and distance something might move or break. With that outcome, we have attached different odds of probability to the success or failure of that pattern.
Each pattern identified typically forms a geometrical shape, and this is where memory and imagination come into play. First, you need to remember that different patterns have different outcomes, and different outcomes have degrees of failure and success. Second, you need to be able to see what others may not in an ever-growing world of technology that is in constant one-upmanship.
The object of the game is to identify the highest-probability chart patterns and milk them for all they're worth.
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Skillful chart pattern recognition also requires the ability to remain constantly vigilant for the possibility that there is no "logic" in what we are looking at and trying to understand. We often call "expanding triangle" patterns "nut hut patterns" because they defy logic and refute the very things we instinctively know as human beings. We are told, "Higher highs are bullish." We are told, "Lower lows are bearish." The "nut hut pattern" houses both!
Here's an example of what the expanding triangle looks like:
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John Lansing is the editor of Trending 123. To learn more about John, read his bio here.
