Have you ever focused so intensely on finding a pattern that you started seeing it everywhere?
Yeah, me too! And it was nearly my undoing…
I blew about a third of my trading account before I learned any better.
This happened to me pretty early on when I first discovered William O’Neil and the CANSLIM method. His book “How To Make Money In Stocks” is phenomenal and I consider it a must read.
Just be careful you don’t make the same mistake I did.
One of the first patterns I learned about were cup with handles. I learned about the shape, depth, time they typically take to form, and the best times to find them.
I studied this chart pattern like I was preparing for my keystone project in grad school.
I thought I was well prepared, practicing this one pattern over and over again. The way Bruce Lee practiced one punch would allow me master of this one pattern.
Unfortunately, this wasn’t what Bruce had in mind. I had misapplied his lesson and learned the hard way…
A Hard Realization
Rather than having the massive gains my trading heroes William O’Neil, Gil Morales, Chris Kacher, and others had, I had a dwindling bank account, the crushing weight of self doubt, the feeling of wasted time, and loads of confusion on my mind.
What was I doing wrong? I had studied for countless hours. Applied intense focus. What the hell was I missing??
I was missing PERSPECTIVE!
I had become so insanely focused on finding cup with handles that I was missing the bigger picture.
It was the equivalent of a doctor examining a patient’s broken hand while missing the stroke he was having!
In trading you need a broader perspective. If you want to win you must always keep the bigger picture in mind.
Stop Hunting For Patterns
You shouldn’t be hunting for patterns. Especially not with a magnifying glass like I was doing.
Take a broader perspective. Start with an awareness of the types of patterns that are out there. The main bullish ones are:
- Cup w/ handles
- Double Bottoms
- Flat Bases
If you’ve been in the game a while I’m sure you can rattle off plenty more. These are the most common and you can do quite well with these alone.
The main bearish ones include:
- Head and shoulders
- Double Top
- Triple Top
- Rising Wedge
- Bear Flag
- Bear Pennant
Again, there are many others but these are the most common and you’ll do fine with them.
What you want is awareness of these patterns. Stop hunting for them. Simply observe and wait for them to present themselves.
Take a look at the sample above. I used to behave like “Them” all the time. If you are so intensely focused on finding cup with handles, you’ll find it!
Be careful where you place your focus. In this case, the old me would have found what I was looking for in the super bearish right shoulder of a head and shoulders top!
So how do we gain a better perspective?
Shifting Our Focus From The Leaves To The Forest
You want to stay in step with the market. Be in tune with it. Feel it.
Sound airy fairy? I thought so too at first! But it’s actually a deeper understanding of the market that we’re all after.
Do you want that crystal ball that some traders seemingly have? Well, this is how you get it!
You want to be in the moment. What many athletes call “the zone”. Mark Douglas calls it that too. I highly recommend checking out his book “Trading in the Zone”.
When you step back and see the bigger picture, you can see multiple things happening at once. The long, intermediate, and shorter term time frames become clear.
You can see if the market is moving up, down, or sideways. These kinds of things are pretty easy to spot! A child could do it.
Why then is it so hard for so many to win at this game? Why did I fall flat on my face for years??
Where Is Your Focus?
A big part of winning at trading comes down to focus. The problem is most of us tend to focus on the wrong things in the wrong ways at the wrong time.
I did it for years. Focusing narrowly when I should have been using a wide angle lens.
Focusing on chart patterns when I should have had an awareness of them and allowed them to simply manifest themselves.
I fixed this problem, but it took me nearly a DECADE to do it.
What are you focusing on? How much longer will it take for you to gain the awareness of what you should be focusing on? Months? Years?
The only thing that we’re constantly running out of is time! Isn’t it time you started taking action?
Michael Lamothe founded MARA in 2018, and his mission is to help traders succeed in the market by focusing on mindset. Michael has helped thousands of traders through his methodology. He is an international speaker, presenting at AAII, Stocktoberfest, Benzinga’s Global Fintech Awards, and more! He’s also been featured on NASDAQ Live.