One thing that the chartist loves most is waiting for his favorite pattern to occur. If he is more flexible, he watches the market detecting various patterns. Human beings are pattern detection machines. Looking at a chart will almost always find some trading chance, which, of course, isn’t real in most cases.
A simple chartist will easily succeed with the pattern spotting, but perhaps not with the trading. The more systematic chart traders try to spot patterns within patterns. At this junction trend traders meet chart pattern spotters.
The best chart formation is the trend. Looking for another chart pattern in a longer running trend seems to be a good idea, since it is sort of a double confirmation for a valid trade idea. Unfortunately waiting and trend trading are mutually exclusive. In the moment your chart pattern shows up and you are in, the trend may have just ended. There is a small exception to this unfortunate combination and this is the trend within a larger trend.
As a general rule for trend followers, don’t wait too long if you have identified a trend!
So, how to trade the trend intelligently? Given that chart patterns work somewhat, but you have to wait for them and waiting is poison for trend traders, we conclude that we should search for smaller patterns that occur more often. This microtrading fits perfectly to the average private trader, because it doesn’t allow large position sizes. Hedge funds, banks and other top predators are shut out.
The successful microtrader has to enter trends without waiting for a meaningful chart formation in the typical sense. That points to a system that is able to enter the market without any reason being there visible for the human eye.
Here is one possible solution. Use an automated trading system to spot sensible entry points that are found by programming a neural net with the price history of a given stock or currency. The net will then adapt to the behavior of this specific price generator and forecast its near future.
If this principle is turned a bit around, the neural net software could, instead of predicting the next days, generate entry and exit signals. The result is a trading style that buys and sells every few days. Astonishingly there is no simple system behind such trading signals noticeable for the human trader.
Of course, this type of trading has only statistical quality. Almost half of all trades will be losers or gains will only be slightly larger than losses. But that doesn’t hurt. Important is that this kind of microtrading or statistical trading works at all, even if only a bit.
If this artificial intelligence trading software is used in a given trend, its results will be amplified by the directional coherence. After all, trend trading is the most profitable form of trading, if done right. The trend trader has an advantage, but he has to find a way to unleash the power of trends. This neural net software for automated trading is one way to make exploiting trends possible. As a second plus, your trading will become more relaxed with this automatism.