Reading Stock Charts Like the Professional Traders
All Technical Traders need to have very high visual pattern skill development so that they can click through charts quickly and identify patterns that they prefer to trade. Unfortunately for most Retail Traders, this skill is underdeveloped, leaving them to rely too much on recommendations, news, chat rooms, and ideas from other traders. There is a new emerging group of Retail Traders called “Technical Traders” who are becoming as skilled at reading stock charts as their Professional counterparts. The stock chart example below has several price patterns that a highly trained Spatial Pattern Recognition Skills (SPRS) Trader can see immediately.
The Technical Traders’ counterparts are the Proprietary Desk Traders, the in-house Buy Side Trading Floor Traders who trade aggressively on behalf of their company, as well as the Independent Professional Traders who prefer to remain obscure and shun publicity.
All of the Professional Traders have highly developed Spatial Pattern Recognition Skills that allow them to scan through hundreds of charts in minutes, which is a requirement of their work.
Retail and Technical Traders can learn these skills by simply studying charts for key elements. The goal is to know WHAT to focus on in a chart first, second, and third. Oftentimes, new Retail Traders try to analyze every aspect of a chart for every chart they study rather than taking one element and then using that as the initial focus of the screening process.
StockCharts.com has excellent scanning and sorting features, but there will always be the final stock pick selection that the trader chooses. This analysis can be streamlined once the trader has honed their Spatial Pattern Recognition Skills to the professional level.
The following candlestick patterns should catch your eye and be recognizable instantly:
- The stock has been in a short-term bottoming development phase that is near completion.
- Momentum is building up in the price action. Giant Buy Side Institutions have been controlling price and dominating the bottoming price range action.
- High Frequency Traders (HFTs) failed to sell the stock down as it dropped into the Dark Pool Buy Zone™ range.
Martha Stokes CMT
TechniTrader technical analysis using a StockCharts chart, courtesy of StockCharts.com
Chartered Market Technician
Instructor & Developer of TechniTrader Stock & Option Courses
Copyright ©2015–2023 Decisions Unlimited, Inc. dba TechniTrader. All rights reserved.
TechniTrader is also a registered trademark of Decisions Unlimited, Inc.