By Brian Shannon, written with Kyna Kosling (@KayKlingson). First published on October 3, 2025. Most traders treat chart patterns like recipes: Follow the instructions exactly, then you’ll get the desired result. But that’s not how the markets work. Certainties don’t exist. Traders risk the price of the unknown in exchange for a possible profit.
Professionals have inherently accepted that uncertainty, while amateurs often have not. Newer traders may look at technical analysis as a predictive tool. When they see a textbook breakout, they buy, without first asking themselves:
- • Where has the stock come from?
- • Where does it have the potential to go?
- • Does that potential reward justify the risk?
(I still ask myself these questions before entering a trade, even after 35 years’ experience!) Amateurs also favor rigid rules, failing to recognize that nothing works all the time.
Trading—and pattern recognition—is a game of probability, not prophecy. The market rewards flexibility and punishes rigidity. When I look at charts, I might notice that stock XYZ is forming a pattern that worked perfectly on another stock last week. Or that the competitor of stock ABC is showing momentum, and that ABC also looks like it’s about to start a
stage 2 uptrend.
(Patterns in the market aren’t limited to chart patterns from textbooks. We also get patterns in human behavior, patterns in stock personality, patterns related to seasonality, and more.) Spotting such patterns increases your odds of finding low-risk, high-probability trades.
However, that doesn’t guarantee those trades will work perfectly. Amateurs blindly follow patterns as though they’re GPS coordinates, pinpointing the market’s exact next move. But patterns can fail, or morph into another pattern with opposite expectations of your original trading idea. In fact, obvious and widely discussed patterns often turn into a trap for uneducated participants—because the more traders use the same, obvious level as a signal to take action, the more likely the move will fail in that area. Patterns are like smoke signals—easy to become distorted by changing conditions.
A pattern simply indicates a series of events that has historically shown a tendency to lead to another specific set of events. In the market, patterns represent recurring behavioral tendencies among participants that often, but not always, resolve in a certain way.
As traders, we’re interested in those patterns that give us a statistical edge—an opportunity for a high-probability, low-risk trade. Patterns are
not mechanical triggers… …yet many newer traders look for cookie-cutter models with a money-making guarantee, when no such thing exists in the markets.
The science of technical analysis is totally different to the art of trading. Absolute precision isn’t realistic in the markets. That’s why you must
manage your risk, and decide in advance at what point your trade idea would be proven wrong—when is it time to exit the trade That’s also why you’ll never hear me say that level XYZ “will” become support or resistance, but refer to it as a “level of interest.” It’s where a bounce
might occur, so it’s a level to watch more closely. A professional looks for confirmation before placing the trade to not take on more risk than necessary. After receiving confirmation, it’s critical you get involved at the
onset of renewed momentum.
NOT after the trend is well underway, when the risks are higher and the reward potential is lower. Professional traders have
clear rules of engagement, and implement them with
discipline… …and with flexibility.
Think ‘guidelines,’ not ‘hard rules.’ You can’t just blindly buy textbook patterns—you need to
interpret the pattern. You must read the story of the battle thus far between buyers and sellers, and understand the current market context. Then, you must develop a thesis about the reasonable next chapter in that story based on similar scenarios from the past.
You try to anticipate the market’s next move. But the market may change the script without warning—again, think of patterns as smoke signals, not GPS coordinates. So, patterns can give you a trade idea. However:
You must then execute based on what actually happens—not what you think ‘should’ happen. For example, if your trade idea is to buy a stock above $40, with a stop at $39, but that stock gaps up to $42 the next day, you can’t treat it as the same trade. The risk–reward has completely changed, so if you still want to buy that stock, you’ll need a different strategy—such as
chase the gap, or wait for VWAP. You need
flexibility to succeed as a trader. You must adapt to the market in front of you.
Accept that you can only control so much—which is why risk management is job #1—and don’t try to overfit, developing that non-existent ‘perfect’ strategy. Overanalytical traders can be really smart, always creating new indicators and oscillators, running extensive backtests, and so on. But when it’s time to pull the trigger, they may freeze due to information overload, or lacking confidence because the scan they built wasn’t perfect, still returning a handful of stocks that aren’t buyable (for your rules of engagement). However…
The market represents the amalgamation of all participants. Navigating the mixed messages those different participants—with different personalities and timeframes—can send requires you to be a self-starter. You’ve got to show
initiative. You can’t just blindly follow rules—
you need to think for yourself. You need
curiosity, so you ask the right questions. Making all ideas your own, and finding your own way in the markets, requires independent thinking. I worry about traders who ask me questions like “What do you think about stock XYZ?” without understanding the
context of the story. But I also see
Alphatrends subscribers ask great, detailed questions, showing the signs of a true discretionary trader. Or they share their own thoughts or ideas, then ask me for feedback to help them improve.
Those are the people well on their way toward consistent profitability.
The next time you see that ‘perfect’ setup, ask yourself: - • What am I not seeing?
- • Am I running into a potential trap?
- • What will I do if it does turn out to be a trap?
- • How would other participants likely react?
Prepare for different price scenarios. Avoid reactive, emotional decision-making.
Anticipate the action.
In short, think like a professional. 
