Trading Patterns, Not Chart Patterns

A really big problem too many people have is that they look for chart patterns, instead of using charts as a way to spot/recognize the trading patterns. It is the trading patterns which we should be looking for. Markets are about trade setups, not predictions. What are markets? They are totally about the supply vs demand situation in markets. And it is the trading patterns which manifests in the supply vs demand situation. All of these technical setups which we look for are in reality a way to get at the (esoteric) supply-demand.

So with all of the super stupid comments about the stock market “crash”, I’ve been very busy, focused on short-term trade setups. I’ve been doing much more very short-term option trading, using QQQ, today one winner, one scratch. As to daytrading stocks, none yesterday, but today I sold the overnight CNET position which I discussed in premarket.  The charts are below. And I included the AKER trade post. Look at the similarities. The main difference is AKER was a runner, CNET was a classic 123 spring into the gap. I sat for days and waited and watched as it kept closing in on the gap, and a trade setup did show up yesterday into the gap. And the AKER chart from a few days ago is below also. Lastly, there is always a bounce – always:

 

 

 

 

 

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About traderscott 851 Articles
Trader Scott has been involved with markets for over twenty years. Initially he was an individual floor trader and member of the Midwest Stock Exchange, which then led to a much better opportunity at the Chicago Board Options Exchange. By his early 30’s, he had become very successful in markets, but a health situation caused him to back away from the grind of being a full time floor trader. During this time away from markets, Scott was completely focused on educating himself about true overall health and natural healing which remains a passion to this day. Scott returned to markets over fifteen years ago where he continues as an independent trader.

13 Comments

    • Yes. PS and SC. And remember what did I say on Wednesday, before we went to the new lows – “we ARE going to new lows” –

      I believe stocks are in a major bull market, nothing changed there. The stock market will continue to be volatile. I believe this whole area, is reaccum, meaning what – more new lows ahead, and “not at all easy – not at all”. Exactly what I’ve been/had been saying about BTC – not at all easy, as we did spike to new lows. Still long BTC and ETH, but aware of this resistance area (chart below).

      How did I “know” that? – because – “I believe this whole area is reaccum”. Why did I say reaccum? Because we had PS, #1 EA. That is my marker to begin the count – PS, hencereaccum. And no, it will not be easy. And yes, the “easy” part is over. Because we’ve had #1 and #2, so now the tricky part, with #3……

      • Yes, an extremely high probability, and you did read what I said – “I believe it’s reaccum”. I “had your back” on that one, you just have to believe in the power of #1 EA. So yes, a great opportunity. I did a QQQ call option trade, I’ll post that. Did you see that list of strong stocks I left in premarket? I also started legging into some of those – small. Why small? There will be more opportunity. “I am stubborn about the trend”.

        Where do you enter? Wait for the new lows. That alone is pretty good. And let it work. “Cut way back on position size”, as you have volatility to help make up for smaller position. And yes, you can try to hone the trade with 123 or whatever, or retests. With my QQQ trade, total daytrade, and I waited for the turn, and the reaccum area.

      • Did the uptrend checklist help?.Of course. A check list works very well for me.
        “so now the tricky part, with #3” can you expand om what you meant by “tricky part”?
        Thanks Scott.

        • Because the #1 and the #2 are the “easy” ones, right? Either top or bottom. Hopefully you are going over those daytrading/overnight trading posts that I put up. Then you know the #1 is over 90%, the #2 75+% – much higher probability than a #3, etc, so after the #1, #2, it starts breaking down. The #2 is almost always lower than the #1. And the #3 gets less certain. It could be a higher retest, it could be right at the #2, it could be lower, or we could still see a #4, maybe a terminal shakeout (much longer-term related accumulation). Look at gold or S&P in the big accum. But even in reaccum, look at BTC. The 123 is the thumbs-up. Have I kept saying, I believe it’s accum, but it “is not going to be easy at all”?

  1. “Hopefully you are going over those daytrading/overnight trading posts that I put up.”
    Not always but I try to.
    I wake up very early to work. Rarely I’m able to read the pre-market on time.

    • Yes you have a lot of responsibility with work. Understandable. So please focus on springs, watch the long-term daily, the 60, the 5. And only do those strong stocks which I discuss, or you are confident about, and do spring trades within the “upside of accum” only. Meaning you will be doing springs of reaccum. And please, only springs off of very solid support points. Your other option – break out stocks. I’ll discuss this stuff more if you’d like. But having to go outside of your home (for now), you need to focus on only the best stocks, longer-term positions, and seriously you just have to have the order in, and believe in the overall setup. And do not trade big. Build your confidence first. Then sloely increase the size. You are a hard worker, you are way ahead of the crowd there.

      • “break out stocks. I’ll discuss this stuff more if you’d like. “Sound good to me.
        I suppose the “break out stocks” is lower probability, however it happens in a greater frequency?

        B)Do you use cup and handle as a timing tool for entry point? If so you go long after the breakout on the handle side?

        • That is not the right perspective, you are only looking for trade setups. If you really hone those breakout stock setups, there is no reason to view it as lower probability. It may be very high probability to someone else. To add, buying breakouts, even “real” breakouts, is not at all my strength. But it certainly is very viable – when really honed, just like everything. I will discuss the CPW stuff in a video.

    • On a more position trade basis, probality-wise, I would not enter there. I need a much deeper selloff, at least back into the PS, #1 EA. For me, the #3 area is not nearly as certain. It becomes more certain via the volume action. The RELATIVE volume fell into each new low, it needs to continue. How do I see that without a deep push lower, or more new lows?

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