Spatial Pattern Recognition Skills Are An Essential Trading Skill Set ANSWERS


Calculating Costs to Determine True Profit is Important

Spatial Pattern Recognition Skills™ are an area where Retail Traders fall far behind their counter-parts, which are the Professional Traders.

To succeed at trading and by that I mean making serious income you must have both the Candlesticks which represent analysis of PRICE and the indicators which represent analysis of Volume, Accumulation/Distribution, Relational Analysis, Comparative Analysis and more. The combination of candlesticks and proper indicators is crucial, and is what all the Professionals use.

The question posed last week was which of the three charts had an excellent Engulfing White, for a strong entry and run for Day or Swing Trading. Only one of the 3 Engulfing White patterns in the QUESTIONS article had a good run.

Spatial Pattern Recognition Skills Are An Essential Trading Skill Set ANSWERS are below.

The Chart 1 example was First Solar Inc. (FSLR: NASDAQ) with a pattern that appeared to be starting a bottom. Here is what happened:

 Chart 1 example was First Solar Inc. (FSLR: NASDAQ) with a pattern that appeared to be starting a bottom. Here is what happened - technitrader

should be obvious on the chart if you have excellent SPRS abilities. Look at the chart again. Study it now that you have the action AFTER the Engulfing White. What is wrong? If you chose this one, what did you miss? 

The Chart 2 example was OceanFirst Financial Corp. (OCFC: NASDAQ). It moved up, however it did not move with momentum.

Chart 2 example was OceanFirst Financial Corp. (OCFC: NASDAQ). It moved up, however it did not move with momentum.

If you had been in this stock, most Day or Swing Traders would have gotten discouraged OR would have exited for a small loss even though netting a slight gain because of the all of the cost factors, not just the transaction fees. The gain of .20 to .40 cents does not cover all of your trading expenses. That is why at the end of the year, traders have minimal to no profit from trading, so calculating costs to determine true profit is important. Study the chart again. What did you miss?

The Chart 3 example was Simpson Manufacturing Company, Inc. (SSD: NYSE) and it had the kind of run you WANT to trade, which is a solid run up with excellent point gains.

The Chart 3 example was Simpson Manufacturing Company, Inc. (SSD: NYSE) and it had the kind of run you WANT to trade, which is a solid run up with excellent point gains - technitrader


What is different about SSD from FSLR or OCFC candlestick patterns? Look at the charts again and see if you can identify WHY SSD was the only chart that actually was a strong entry and a great Day or Swing Trade. If you did not pick this one, what did you miss? Why did you not select this one?

This lesson is a BASIC skill. You need to be able to quickly look at a small group of charts and candlesticks, select the best one, and then confirm with proper indicators for a complete analysis.
How did you do? Did you get the correct answer? If you have been trading for more than 5 years, it should have been an easy task to choose the right chart.

What I find with most Retail Traders who have been trading for decades and are still trying to find a magic indicator or holy grail that will make them successful, is they simply lack basic skills of Technical Analysis.

Keep in mind that learning Technical Analysis, Candlestick Patterns, or Indicator Patterns is NOT learning to trade. You have to combine all of these into a Trading Process that works.

Summary

Spatial Pattern Recognition Skills are a basic skill that is crucial to success in the Stock Market. Now I expect some of you will be grumbling that it could be too hard to learn, does not matter, or why not just use the indicators?  Well you would not be reading these articles if you were making 6 digits a year, now would you? 

For me, teaching in my retirement when I could be doing many other things is about helping Retail Traders see what they need to focus on, to help them become successful. So go over the charts again. YOU matter to the stock market, and your success matters to the stability of the market and that is why I teach.

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Trade Wisely,
Martha Stokes CMT
TechniTrader technical analysis using a StockCharts chart, courtesy of StockCharts.com


Chartered Market Technician
Instructor & Developer of TechniTrader Stock and Option Courses
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