Hello,
I've been lucky enough to meet and pick the brain of a CMT (chartered market technician) for a few short hours. He manages a rather large sum of wealth for private investors as well as offer research to some of the top firms. He has been a practicing technician for last 11 years. While he showed me some of his charts, I was amazed at how quickly he was annotating random charts and finding patterns and previous support/resistance levels across multiple time frames and confirming them so quickly while offering a logical sound thesis for the future direction based on candles/western patterns/volume/ moving averages/etc.
So in terms of charting patterns, I own and have been skimming Bulkowski's encyclopedia of chart patterns, specifically the most common patterns. ---
Head and Shoulders (inverse H&S)
Cup With Handles (inverted cup)
Rounded Bottoms (top)
Double or Triple Bottoms (top)
Triangles (Flat Top/bottom/symmetrical)
W formations
Flags
Pennants
Wedges
Diamonds.
So when I mentioned the Bulkowski book to him, Encyclopedia of Chart Patterns, which is a book known for its specificity in defining these western patterns. He was familiar with it, as it was required reading for him at one point, however, it did not match up to his trading methodology so he was not a huge advocate of learning by strict definitions of what constitutes a pattern.
Take note I am speculating, and please offer your opinion, if you have one, but there seems to be two different methodologies to recognizing patterns, 1) memorizing patterns exactly and matching it with a pattern that resembles what you memorized 2) reading chart more freely without being confined to strict definitions. For example, "there are higher lows coming off a downtrend, how come buyers willing bid higher despite negative picture?" ....i.e. inverted H+S pattern). The last method having a much lower emphasis on the name of the pattern, and more focused on the markets movement.
While doing some different example exercises, I noticed I struggle to notice some chart patterns despite them being obvious right in front of my eyes and having read about them beforehand extensively. Surely, someone who has seen thousands (if not millions) of more charts more than me will be able to see more stuff than someone with much less experience. However, as mentioned before elsewhere, reading charts seems to be much more of an art form than an exact science.
However, I wonder what is the fastest, most efficient, method to hone this skill. So my questions to any of you who feel qualified to answer, how do you speed up the learning curve in pattern recognition? Is there any literature or different methods, that you can advise? Feel free to pm me or post here -- open to talk about anything else you may find interesting.
Thanks!
