Here is a comment I received that I feel is worthy of a discussion rather than just a few sentence reply that many may overlook in the comment section. I’m curious to hear what others have to say about this topic.
Another interesting question might be: Why do human beings look so hard for patterns, perhaps, so hard that we find them where there are really none? Just a thought, not a challenge to your charting skills, which I totally respect.
I believe most humans search for patterns within the stock market, as well in their own lives, to give some type of structure and meaning to an otherwise random existance. I remember reading somewhere that it’s actually an embedded habit within us to try and make association even when there is really no connection.
For example, when you see somebody on the street and they resemble a friend you had in the past, it’s normal for you to note to yourself how much this random pedestrian looks like somebody you used to go to school with. Even though they have absolutely nothing to do with each other, it’s just happens naturally. Maybe this is simply one of the reasons that people search for patterns because it’s in our genetic make up.
For me personally, I find that it helps me to try and make sense of all the numbers, charts, and indexes, and the way I do this is to look for patterns that reoccur in an attempt to determine what may happen in the future. At the same time I realize that my forecasts can be, and are often wrong, so it’s important to have a back up plan and that is where stops and exit strategies come in handy. If I wasn’t able to devise a way to structure the data in a way that I can make sense of it, I would never be able to place a trade. I’d just be staring at the quote screen in a zombie like fashion, remaining in fear of pulling the trigger because I wouldn’t know when to take my profits or exit for a loss.
Some traders do look for patterns to support an existing theory on what they think the market “should” do and that is a bad habit to fall into. Traders should never get locked into a one-sided view of being bearish or bullish, because it’s very easy to develop a bias that will permeate your chart vision, only reinforcing your market bias.
However when you look within nature you see reocurring patterns all the time. Look no further than the Fibonacci Sequence to silence the pattern doubters.
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