Stock Market Wisdom-Learning to Trade Like the Legends, Part 5

The flat base chart pattern is one of my favorites

, and is one of the main patterns used by trading legends for many decades. Fortunes have been made trading a proper flat base pattern. The pattern moves pretty much straight side-ways, in a somewhat tight price range for at least a month or more. You do not want it to correct more than 10-15% during the duration of the pattern. On the breakout through the top of the pattern, you want the volume to be quite a bit heavier than normal. An example would be a stock in a trading range between $20.00 and $22.00 for 5 weeks. Then, after the 5 weeks of consolidation, the stock price breaks out to $22.25 on very heavy volume. That would be your signal to buy.

The best traders and investors throughout history usually kept a detailed record of their market observations. This is much better than only depending on memory. They would record vital information such as entry points, exit points, recurring chart patterns, reasons for the actions they took, and other general market observations. By analyzing detailed notes, and learning from them, even very good traders can make improvements. For a long time, I have taken detailed notes from my trading activity. It has definitely enhanced my overall results.

Trading masters know when someone says, "This time is different", it really is not. In 1929, most traders believed the bull market would last forever. It ended with a major crash. Early in 2000, most traders thought this bull market would never end. It also ended with a major stock market crash. Human nature is what causes all the cycles and patterns in the stock market. Human nature has never, and will never change. It was the same in 1929 as it was in 2000. It will also be the same in 2050, and in 2100. The very best stock market operators understand trading psychology, and use it to their great advantage.

The very best traders and investors throughout history have done an excellent job of finding high-probability trades, and low-risk opportunities. It is all about putting the odds in your favor trade after trade.

Stock Market Wisdom-Learning to Trade Like the Legends, Part 5

By: Gary E Kerkow

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