The impulse-driven crowd generates constant price imbalances that traders can exploit. But successful execution requires accuracy in both time and direction . Chart pattern analysis allows measurement of the emotional crowd's impact on these key elements. Within the charting landscape, exact price triggers can be located where these unstable forces should erupt. You can only capitalize on the emotions of others when you are able to control your own.
Pattern analysis cautions the trader to stand apart from the crowd at all times.
In simplest terms, they represent the attractive prey from which your livelihood is made. And just as a wild cat stalks the herd's edge looking for a vulnerable meal, the trader must recognize opportunity by watching the daily grind of pattern swings and volume spikes. Gaps reveal sudden and important changes in crowd sentiment better than any other pattern tool. Always distinguish between gaps made in the direction of the prevailing trend and those going against it. Countertrend gaps often flag major reversals without the need for a long series of price bars.