So true. It's a very naive and gullible approach to be memorizing patterns and trading from the hip based on instinct, memory (with all it's faults) and gut feel. Perhaps a very small percentage may be able to accomplish something interesting with such an approach after thousands of hours of screen time and practice, but most people will only be setting themselves up for failure.
Yes, patterns do exists. Every day. But in order to recognize and capitalize on them consistently and successfully, you need to quantify your market.
Just look at a pattern that everyone knows. The H&S pattern. The truth is that this can just as often be a continuation pattern UP as it is a sell pattern DOWN.
How would an intuitive trader know the difference?
EDIT: I should add that my comment is geared towards day trading the market. Over a longer time frame you have much more time and clarity of thought for making a decision, but the same principle generally applies, although not to the same degree. IMO.
I hope you realize that
before you can quantify a pattern...you need to learn it, memorize it and then design a code for it.
Further, if you're going to code it...you can then automate it or make some kind'uv mechanical alert system that its been identified and you then manually trade it.
Reality, traders that memorize and learn their pattern...they are not trading from the hip. In contrast, traders that don't understand the pattern and don't memorize it and then they decide to trade that pattern...they are trading from the hip on instinct. The latter reminds me of that thread here at ET about the "dragon pattern" in which the thread starter states at that time of the thread that he had just learned it a few weeks ago and was now trading it with real money and he couldn't figure out what it was that he was doing wrong.
My point is that you seem to forget there's a large group of traders in between the two groups that you mentioned...traders not automated and traders not gullible to trade from the hip. That involves trades that uses rules and have memorized their pattern...traders that have developed the ability to recognize it in real time and develop the ability to react (make trade decisions) based upon accurately identifying that pattern...while they choose to trade it manually instead of automating.
You mentioned H&S pattern. The truth is that
some traders do not view such as one directional (Up or Down). Those are the naive traders that trade such and view it as such. In contrast, some traders see what's called a Bearish H&S pattern and they don't view it as bearish...as if they should only be looking for Short signals. Instead, they are looking for Long and Short opportunities within that Bearish H&S pattern and they are looking for Long and Short opportunities within that Bullish H&S pattern.
Thus, as you stated...if you know the truth about that pattern...what prevents you from trading it as such instead of getting caught up with its "name" ? (question is not actually directed to you).
The real failure as in most traders...its not the pattern. Its the trader that has failed to understand the markets and themselves as traders interacting with the markets
prior to the appearance of any pattern or trade signal. These are the same traders that do not understand that successful trading involves many things beyond trade signals.
