Charts patterns are the roots of technical trading. There is enough empirical evidence to suggest that chart patterns make money because they are a representation of market structure. But still many traders fail to be profitable while using chart patterns as the basis of their trading. What could be the reason behind this??
Perhaps the patterns are not really tradable?
Well, I think it will not be good to blame patterns because many traders use chart patterns as a basis of their trade, but everyone is not making a bad trade. Few traders are making profitable trades using the same chart and same pattern while many other traders are making a loss.
Every trader has charts that show the same patterns and indicators. But, a few of them doing good and many of them are doing unprofitable (bad) trades. So, it is obvious that failure is in the trader, not in the charts or indicators. But the question is still standing - what is the reason of failure of a trader?
There could be few simple reasons behind it.
First,trader is not following his discipline properly. There are broad rules for entry, exit, taking profits, as also in using context to ascertain the probability of success for the pattern. When a bullish head and shoulder is made after a sustained bear decline, the chances of success out are strong. When the same pattern is made after a shallow decline, the chances of failure are stronger. This is context.
Second, the trader is having lack of patience. rather than wait for high probability patterns, the trader rushes in to take the trade.
Third, the trader is thinking too much, wants a lot of confirmation and becomes unable to take the trade.
Fourth,but only in few cases, trader fails to recognize the pattern accurately or he/she is not following the pattern.
These are some of the reasons for chart patterns giving different outcomes for different traders. Your views are welcome.