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Why You Lose Money With Chart Patterns (Even When You Have Studied Them Correctly)

Why You Lose Money With Chart Patterns (Even When You Have Studied Them Correctly)

hey hey what’s up my friend so in today’s episode right I want to talk about why you lose money trading chat patterns so I’m sure you probably you know know stuff like hidden shoulders pattern taboo flag pattern diamond pattern triple top double top double bottom etc and you memorize all these patterns what it means but still right you you lose money right when you treat these patterns why is that so so there are a few reasons for it and I want to break it down right in today’s episode number one you fail to take into consideration right in the context of the markets so what do I mean by this so imagine this right you spot a blue flag pattern okay price you know a Raley’s higher and it makes a potential boof like pattern under it’ll retrace but very weak right signalling that you know the price could break out higher but here’s the thing right the overall market is in a downtrend so imagine this right a bull flag pattern there is form within an existing down trip what are the odds of that bull flag pattern working out on the other hand let’s say another scenario this time around the market breaks out of the ridge to all-time highs and a bull flag pattern is formed imagine out this scenario the price is at all-time highs it makes a potential boof like pattern what are the odds now of this particular setup working on so can you see what I mean by context of the market I’ll give you two examples one is when the market is in a long-term downtrend you’re looking to buy the bull flag pattern two is when the market breaks out to all-time highs and it forms a potential boof like pattern see the difference between the context of the markets that you’re trading this is important right if you take into consideration the context of the markets you’ll find it your chart pattern trading right will improve so there’s the first thing second thing you neglect right the significance of the chart pattern what do I mean by this so let’s say the market is in a long-term uptrend over the last 200 candles the market rate has been no overall going up steadily and right now right the market actually formed a hidden Shoulders pattern and this head and shoulders pattern right only took like 20 candles to fall okay so imagine this right a head and shoulder pattern is formed right on the basis of 20 candles and this right is in a long-term uptrend this market condition and this long-term uptrend right is defined right by 200 candles right meeting maybe the price goes higher highs and higher lows over a series of 200 candles and any forms a head and shoulders pattern right and is made up of 20 candles now as a several what is the significance of this Head and Shoulders pattern what are the odds of this head and shoulders pattern really right the long-term trend 200 candles right off and overall uptrend verses a 20 Kendall here in Shoulders pattern I mean logic will tell you that the marking right is likely to continue higher because this hidden jewel this pattern is pretty done insignificant it’s only 20 candles versus right a 200 candle uptrend do you see my point now let’s change this scenario a little bit now what if again same thing right in the trend the uptrend is made up of two hundred candles but this time around a head and shoulders pattern is made up of three hundred candles so you can imagine it this time around the head and shoulders is much bigger because it takes 300 candles to fall now do you see the significance of this because when you have a hidden shoulders pattern that is made up of three hundred candles then you know the dynamics have changed drastically right because now the the neckline of the head and shoulders pattern all otherwise known as a supporter it will be obvious he will capture the attention of a lot of traders and when that level becomes significant right even on the higher time frame traders right if it breaks right that is now more significant because it breaks a key area of support that has been defined over 300 candles even in breaks right that becomes a more significant chop and that compared to our here that shows pattern which is formed over 20 candles so pay attention to the significance of the chart pattern as well all right if he falls right you know after 5 or 10 candles it won’t be a significant compared to a pie chart pattern and its form over 100 200 candles the third thing right you neglect the nuance of the chart pattern so what do I mean by the nuance of a chart pattern so again let’s just remain at shoulders and since this is likely the most popular one out there so here in Shoulders pattern you know you have a left the the left shoulder you have the head which is the highest pick of all and followed by the right shoulder and if you think about this right the classical head and shoulders pattern when the price drops from the right shoulder to the neckline it will make quite a distance right the move is quite a distance and if you think what is the move has made quite a distance to the neckline let’s see the neckline is here then this right shoulder right it dropped down to this neckline over here it’s quite a distance already and there will be traders who look at this right and say this neckline is an area of support they are looking to buy in the price reverse from the neckline and continue higher can you see where I’m coming from so this is a very typical Head and Shoulders pattern right the right shoulder drops to the neckline and the price reverses higher because it came into an area of support but what if right now this hidden shoulders pattern it formed in a slightly different manner for the right shoulder instead of dropping straight into the neckline what it does is that it drops into the neckline it starts to consolidate consolidate and the neckline may be forming a tight consolidation now the message right by the machinist has changed because it’s telling you that it has reach an area of support otherwise known as the neckline but it failed to rally this tells you that you to take someone there is a lack of buying pressure on the two selling pressure is coming in to hold the price down lower and if the neckline breaks okay there will be a flood of order right sell stop-loss order that’s big trigger and it would you don’t add fuel to the selling pressure and that’s where the likelihood of a reversal is much higher so can you see again the two scenario a normal head and shoulders pattern right one the right shoulder just simply dropped quickly with a huge momentum into a neckline and the second or second one which the price approaches the neckline starts to consolidate for a while before it breaks down so these are the nuances right to chart patterns and you have to understand these different nuances you can’t just think the classical chart patterns shown by the textbook or courses and memorize it and then look to trade it no you got to understand all this different variation and nuances where traders might get trapped where would your stop-loss get triggered and stuff like that okay so chat better this more than just you know memorizing all this it’s not an exam you know this is the real world of trading and the fourth thing I wanna share with you is this is that traders thing that shop methods can predict the future come up with I mean I don’t blame you because that’s what I thought I saw you know you see a triple top or main the market is on reversal or double bottom is a is the recoveries in place all right time to buy buy buy no it doesn’t look that way right Chuck pendants there’s just simply tools right you have you gauge buying and selling pressure in the marketer who has the upper hand the bias or to sell us and that’s pretty much it right and Chuck petals help you define levels boundaries or where you can look to enter a trade and set your stop loss that’s really what Chuck method is about right identify the buying and selling pressure and then finding your useful price point levels based on chat pattern to send your entries and stop-loss and even manage your trades if you want to so that’s really what Chuck patents is useful okay not trying to predict what the markets will do so when you do this right when you know that there is always a probability of a loss even though the hidden shoulders pattern may look extremely beautiful all the stars are aligned there’s always still a probability of loss so you still must take into account your risk management okay so I hope this this pointers help right if you’re struggling with Chuck patterns right chances are is because of one of these reasons that I’ve just pointed out so that’s it I have come towards the end of today’s episode if you’ve enjoyed it give me a thumbs up subscribe to the channel and I will talk to you soon you


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