Week in Review: From Apophenia to Professional Trader

Posted on Nov 8 2015 - 8:51am by Sharpe Trade


Have you ever noticed a “pattern” as you look at a chart of stocks?  Or a “pattern” on a Forex chart?  Or perhaps even a “pattern” within economic data?  We have.

But we also believe that the search for patterns in the marketplace is actually a dangerous mental process to engage in.  We discuss our rationale behind this thought, as well as two concepts that may assist you in your own growth as a trader … in the following podcast ….

If you prefer to listen to this podcast on YouTube, you can do so here.  Our podcasts are also on Podbean, and at the same time, we have an itunes feed and you can find our podcasts on itunes if you prefer to subscribe there …

2 Comments so far. Feel free to join this conversation.

  1. NewLife November 9, 2015 at 11:18 am - Reply

    Interesting topic. Exceedingly specific patterns are elusive, but as you said, very broad “patterns” exist. And I mean this in the most simplest way possible i.e. price moves up and down. From higher to lower momentum. And as you said, this is an analog of human behavior as people digest information, and subsequently get excited thus pushing prices further, or rejecting the trend.

    It took me a couple years to grasp this. Against all rational and valuable input I’d received from traders like yourself, I continued looking for complex patterns in charts which I never found. Sometimes you could see a repeat of an indicator/candlestick/price-action combo once or twice, but it was coincidence and useless for the most part.

    Only in the last year have I broken down my strategy into – with the use of two tools, I determine that price is moving in a direction and has taken a break or pulled back sufficiently. If it continues in the direction it was going before the pause or short term reversal, I’m hopping on the train and going along with it while limiting risk as much as I can.

    You posted an interview with Marty Schwartz on your youtube stream recently, and that was great. While I think he is highly rational, it was revealing to hear him say that much of his trading has become “visceral” over the years. It seems that over time, many successful traders reach this level where they are “in the zone” when trading, and while they may apply technical analysis, it becomes more of a subtle understanding of what’s happening rather than a strict reading which can be articulated or highly systematized.

  2. NewLife November 9, 2015 at 11:32 am - Reply

    Also, on the topic of Pawn Stars and other markets, I should mention that I may have made my best trade ever, and it’s not a stock or currency.

    We bought a condo 3 years back for about $71k and our mortgage payments were far less than what rent would have been over the past few years. A neighbor recently discussed buying it from us for $125-130k. I was pretty confident at the time of purchase that housing prices wouldn’t go down a whole lot further than they were at the time, but didn’t expect such a quick upside.

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