What are trading patterns, how do they work and are they real?


I don’t get if those patterns are real and what stop, entry and targets mean. Is it a reliable source? I give you an example: https://www.ig.com/en/trading-strategies/10-chart-patterns-every-trader-needs-to-know-190514

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2 Answers

Anonymous 0 Comments

It’s generally not reliable no. And many countries force people to make disclaimers: “past performance is no predictor for future performance” when advertising stocks like that.

They say there is a general pattern of trade value going up and down in a certain cycle. That may be true for a while, but you never know when the pattern stops.

Stock trading is always a competition against other traders. If a pattern is well known then it’s not valuable, because others will try to follow it as well and ruin it. You can only profit reliably if you know more than the other traders (and the traders happen to involve professional hedgefunds that do nothing but analyzing all day)

Anonymous 0 Comments

Trading patterns or technical “analysis” is extremely unreliable. It’s saying that “in the past, we saw this pattern based on the stock’s price and volume, and we expect this pattern to occur again.” If it were this easy then everyone would be rich. In reality, stock prices are extremely unpredictable, especially for micro-cap stocks that are traded within minutes or seconds (which is the realm of most technical “traders”).

On the flip side, if we broaden our definition of “trading patterns”, people profit from it everyday. The difference is these people graduated top of their class with a pHD in Mathematics from the top schools in the world and work at quantitative trading firms like Jane Street. The patterns they capitalize on are much more complex than ones like the head and shoulders pattern in the article (if you can call that a pattern). They take into account every single variable, run complicated arbitrage strategies, and complex statistics.

So in short – trading patterns can work but likely not the ones like in the article.