Spatial Pattern Recognition Skills
Tips How to Trade Like a Professional
All Technical Traders need to have very high visual pattern skill development so that they can click through charts quickly, and identify patterns that they prefer to trade. Unfortunately for most Retail Traders this skill is underdeveloped, leaving them to rely too much on recommendations, news, chat rooms, and ideas from other traders.
There is a new emerging group of Retail Traders called “Technical Traders” who are becoming as skilled at reading stock charts as their Professional counter parts. Their counter parts are the Proprietary Desk Traders, the in-house Buy Side trading Floor Traders who trade aggressively on behalf of their company, as well as the Independent Professional Traders who prefer to remain obscure and shun publicity. All of the Professional Traders have highly developed Spatial Pattern Recognitions Skills SPRS that allow them to scan through hundreds of charts in minutes, which is a requirement of their work.
Retail and Technical Traders can learn these skills by simply studying charts for key elements. The goal is to know WHAT to focus on in a chart first, second, and third. Often times new Retail Traders try to analyze every aspect of a chart for every chart they study, rather than taking one element and then using that as the initial focus of the screening process.
Stockcharts.com has excellent scanning and sorting features, but there will always be the final stock pick selection that the Trader chooses. This analysis can be streamlined once the Trader has honed their Spatial Pattern Recognition Skills to the professional level.
The chart below has several price patterns that a highly trained SPRS Trader can see immediately.
- It has been in a short term bottoming development phase that is near completion.
- Momentum is building up in the price action. Dark Pools have been controlling price and dominating the bottoming price range action.
- High Frequency Traders HFTs failed to sell the stock down, as it dropped into the Dark Pool Buy Zone™ range.
- Currently Professional Traders are moving into the stock, creating underlying currents of momentum.
- The Accum/Dist indicator shows intermittent Accumulation patterns.
- The October extreme sell-off rebounded the same day as Dark Pools entered. Subsequent lows of the bottom are higher lows.
- The short term bottom is a shallow W, which means it could easily retest those W lows from a triple low given this is a short term bottom.
- Volume has been increasing in the past week.
- Resistance at the completion level is moderate, and could be broken through IF sufficient momentum was behind the breakout attempt.
- HFTs have been in this stock frequently and could appear again.
Charts are full of information that Retail and Technical Traders can use, to understand what is going on in terms of the Market Participant Groups who prefer to trade short term bottoms. This allows the Retail and Technical Trader the time needed to make proper and productive decisions as to whether this stock is worthy of their Watchlists, what Trading Style they should use, and thus what Strategy will work best. When Traders have excellent Spatial Pattern Recognition Skills they are able to quickly check a list of stocks and select the best one for their Trading Goals and Personal Trading Criteria. The more a Trader relies upon their own decisions, analytical skills, risk tolerance, and personal preferences, the better trader they will become.
Professional Traders are very independent thinkers. They do not sit around all day chatting, but instead are busy developing their own Trading Styles and parameters. They do not share their ideas, trading methods, or strategies. This is because when everyone is trading exactly the same way it creates anomalies in the order flow, which can be detected by predatory trading systems such as HFT algorithms which can wreak havoc on trading profits and create whipsaw action. Learning to trade like the true Professional Trader takes some effort but the results are well worth the time.
Martha Stokes CMT