It is true when they say that most things in life follow patterns. However, sometimes it is hard for us to recognize these patterns. The markets are no exception. To be successful, a trader must train his or her eyes to recognize and predict upcoming patterns. See if you can guess the next shape in the pattern below:
If you predicted a square, then you would be correct. You guessed the right shape because you were able to recognize patterns in the previous shapes. I learned the significance of recognizing patterns when I visited Vernal, Utah a few years back.
Vernal, Utah is world famous. Seriously it is. It is world famous for dinosaur bones. There is the highest concentration of dinosaur bones there than in any other place in the world. I took my 5 and 3 year old at the time to the dinosaur quarry to see some dinosaur bones. Needless to say, it was quite an amazing site. You can’t put your hand on the quarry with out touching two dinosaur bones. There is also a small nature hike that you can take and see dinosaur bones that are jutting out of the mountains in the area. After chasing the kids around the visitor center for a while, I decided that they needed to burn off some energy. So I decided to take them on the hike.
So the guide was telling me before the hike that you can see bones all over the place on this hike. However, we were nearing the end of the hike, and up to this point I was not able to point out to my son a single dinosaur bone. I was looking and looking but for the life of me I could not find a single one.
Finally, in my frustration I turned to the guide and asked him where all of these so called “dino bones” were. He laughed a good laugh, and claimed they are everywhere. He then pointed to the ground, and not two feet from where I was standing there was a dinosaur bone embedded in the rock.
I have since thought back on the at experience and have wondered how was it he could spot a bone so easily? It wasn’t until one day where I was showing a trader a head and shoulders pattern. I was seeing the turning points in the market that formed the pattern. I surely knew what was coming next, but the trader could not see it. Then it dawned on me. The guide on the hike had trained his eye. He knew the patterns in the rock. He had trained his eye that when the pattern of the rock went from speckled to smooth, he knew he was seeing a dinosaur bone.
We also as traders have to train ourselves to see the pivot points, the turning points in the market. As you train your eye you will be able to see the opportunities that are all around you. If you don’t train your eye to see, you may be the person who goes on a hike with dinosaur bones all around you and never see one!