Hello Steemit community!
Like many other traders, I know of chart patterns and recognize them when I see them. There are a lot of them, but here is a list of the ones I believe every trader should know.
Reversal Patterns
Double Top Reversal
Double Bottom Reversal
Head and Shoulders Top
Head and Shoulders Bottom
Falling Wedge
Rising Wedge
Rounding Bottom
Triple Top Reversal
Triple Bottom Reversal
Bump and Run Reversal
Continuation Patterns
Flag, Pennant
Symmetrical Triangle
Ascending Triangle
Descending Triangle
Rectangle
Price Channel
Measured Move - Bullish
Measured Move - Bearish
Cup with Handle
TIP: My desktop background is a matrix of candlestick patterns with their names and an example of how they look. Also, I believe that all traders should have printed copies of patterns hung around their desk in an organized fashion from bearish signal to bullish signal, from trend continuation to trend reversal. Like this, by glancing up, you can instantly recognize if the pattern you are seeing is accurate or not. Also, by having them available for the viewing at all times, the patterns will slowly get ingrained in your head to the point that you no longer require having them hung there.
The reason that I am making this post though, is to discuss a thought of mine.
Do popular bullish/bearish patterns become self-fulfilling prophecies? I think so.
I believe that the patterns which are most known to traders such as cup-and-handle (bullish) or head-and-shoulders (bearish) are so well known to the average trader that they become self-fulfilling prophecies.
Since so many people recognize these patterns, they act according to how those patterns should behave. By doing so, they create momentum into the direction they believe will happen and therefore the predicted price change does actually occur.
For example, if I see a cup-and-handle, I will long the coin, not short it. Therefore, if many people do this, the price increases as the pattern suggests it should. However, let us assume a cup-and-handle formation was a bearish signal and not a bullish signal. Would that mean that trader’s perspective on the formation would make them want to short it since it would be considered a great position to open a short from? I think it would. This means the cup-and-handle would become a sell signal that people would act upon and it would therefore drive the price down, becoming again a self-fulfilling prophecy.
So, if there was no list of patterns with their meanings, would they eventually receive the meaning they were originally given? I think so, but who knows!?
I would be interested in hearing people’s thoughts on this.
Also, I believe this phenomenon is truer for cryptocurrencies than for stock markets since the vast majority of people are traders and not long term investors.
Yours truly,
Lucas Hohl-Marchetta.
Please comment and let me know if you also believe that popular patterns do actually become self-fulfilling prophecies! I'd love to know people's thoughts.
:)
Congratulations @lucashm! You have received a personal award!
Click on the badge to view your Board of Honor.
Do not miss the last post from @steemitboard!
Participate in the SteemitBoard World Cup Contest!
Collect World Cup badges and win free SBD
Support the Gold Sponsors of the contest: @good-karma and @lukestokes
Congratulations @lucashm! You received a personal award!
You can view your badges on your Steem Board and compare to others on the Steem Ranking
Do not miss the last post from @steemitboard:
Vote for @Steemitboard as a witness to get one more award and increased upvotes!