patterns et al

[jezza888]

I don't know if this is a stupid question or not but I'm going to ask it anyhow!

The markets are predominately moved by market makers and guys in the exchange and for forex, in banks worldwide. More retail traders exist than ever before also but on this premise, my question is thus...

The people with the large money that move any market or stock don't use charts and indicators, nor do they sit in front of screens looking for patterns.

I understand Support and resistance but how do things like head and shoulders form, especially on forex where its so widespread? Surely the guys and galls moving the markets which we are all trying to take a chunk of by anticipation of the market direction aren't sitting there saying 'stop, wait, the top of that shoulder is forming, or, that descending triangle can't go any higher, quick sell....

Is it just a case of support and resistance causing it or what, because I don't believe (don't know how it works) these guys look at these charts and think the same things we do when we look at charts????

Any thoughts...?

J

 

[timsk]

The people with the large money that move any market or stock don't use charts and indicators, nor do they sit in front of screens looking for patterns.
Any thoughts...?

I believe that the trader who blindly follows easily recognisable patterns such as H&S, triangles and flags etc., is putting the cart before the horse and will, sooner or later, come seriously unstuck. The patterns are a consequence of supply and demand along with fear and greed at key price levels. To be able to recognise a pattern but to have little or no understanding of how or why it formed, is what separates those traders who are able to profit from said patterns from those who are not. If you want to learn more about how and why the patterns form to begin with, as a starting point have a gander at dbphoenix' explanations of supply and demand. Here's a link:
http://www.trade2win.com/boards/showthread.php?t=11104
If you don't want to wade through such a lengthy thread, click onto dbp's www icon and you can download some free stuff that he's written on the subject which, IMO, is very illuminating.
Enjoy!
Tim.

 

[jezza888]

Cheers Tim,

I will do, I don't actually use them as entry or exit indications but curious/amazed at how they appear so prefectly without the market movers actually purposefully ensuring they form, nor having any realisation that they are doing so!