Complex Chart Patterns Are Just Combinations Of The Simpler Ones
By Lawrence
Part of Art of Chart Reading
Many traders are obsessed with the idea that there exists secret uber chart patterns that produce superior returns with virtually no risk involved. If you are one of them, you should reread what I have written from the beginning of this series. Maybe there exists such patterns but it is also likely to happen rarely, so rare that it is not enough to produce profit frequent enough. For patterns that recur more often, there is no escape from dealing with the possibility that the future refuses to unfold as expected.
Instead of paying too much attention towards complex chart patterns, it is often better to focus on simple chart patterns and their combined predictive power. Think of simple chart patterns as tools to manage your risk when applied individually. Each pattern you recognize on the chart gives you certain expectations of what may happen in the future. Sometimes they tell a coherent story making you feel like you are in control. Sometimes they provide conflicting projections into the future making you confused.
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LC what about simple patterns displayed in volume/price-based candles that made up the patterns or bar-driven candles that form the patterns…
Those are price bar patterns, not swing patterns I am talking about here.
Price patterns are completely different because the micro swing information within the bars were lost due to summarization where you only have the end stats (open, high, low, close).
Yes I know, I noted that vol/price-based candles do produced patterns like drive-up, 3 drives, HNS but not sure how confirmed are these…
My reply above already gave you the answer. Because the swing information is lost permanently, patterns you see are not as reliable as the ones that you have the swing information.
Many Thanks !