Reader question: What is the most important chart pattern?

Reader Jeff asks:

Quick and I hope simple question here. What is the most important thing to look for on a chart when I’m studying for an entry? Candles? Indicators? Classic patterns? Where should I start? (Background is I’m a struggling trader a few years but no longer losing money but not making money.)

Hi Jeff,

First of all, let me say congrats and remind you (and everyone reading) that not losing money is a legitimate and important step on the way to success. You may be struggling, but you’ve struggled further up the ladder to success than you might realize.

Your question could get very involved, but let me keep it simple: There’s no one answer to this, and I think different people would have very different answers. For me, I assume that most of what I see on a chart is random garbage, so I want to be reasonably sure that I’m looking at something significant and real. To that end, I tend to only look at charts that have made strong moves, and to read what happens after those moves. (I wrote a blog post on this idea recently.) You can quantify that idea in many ways, but you can also do good work by simply training your eye to see sharp thrusts on charts.

As another aside, there should be no “studying” charts. Once you understand the patterns you’re looking for, a chart can be read at a glance. Literally (let me stress that word: literally) three seconds is enough time to see if there might be an opportunity or not on a chart. If it’s a “maybe”, then we might spend a few more (30?) seconds looking at it, deciding on entry and stop location, or deciding to pass on the trade. But I don’t think there’s much to be gained from in-depth study of a single chart because, well, I think most of what we see is random, unreadable noise.

Check out that link and look at some of the other things I’ve written on specific patterns. If you want to dig deeper into actually trading these patterns, my always free trading course is a good place to start (and to spend about a year digging deeper!)


Adam Grimes has over two decades of experience in the industry as a trader, analyst and system developer. The author of a best-selling trading book, he has traded for his own account, for a top prop firm, and spent several years at the New York Mercantile Exchange. He focuses on the intersection of quantitative analysis and discretionary trading, and has a talent for teaching and helping traders find their own way in the market.