How can profitable trading patterns continue to exist?

I always wonder how can a profitable trading pattern (if there is such a thing) continue to exist? If they actually work, won’t they be used up or arbitraged out, fading them away? I’m talking about head and shoulder, cup and handle, those sort of things.

Or does it mean the market isn’t efficient enough, making them appear several times?

I’m not a trader, I’m a long term passive investor. But I’m just curious about this and hope someone can enlighten me.


Here you go!
Any trading pattern fails or succeed almost similarly as it used to be decades ago!

I don’t know if you got me right, but I’m interested to know why they still exist. Aren’t they getting used up as market evolve?

By the way, I don’t think you quoted me appropriately. It looks like I’m confirming market isn’t efficient, which I didn’t.

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Markets as like everything else in the world, are an endless cycle of fear/greed, efficiency/inefficiency, good/bad, happiness/sadness… most of the times they might be skewed towards one side or the other but inevitably they always change, there can be a balance sometimes but never perfect and still almost ever changing.

Edit : Let me clarify one thing on why the trading patterns continue to exist? Aside from being a self fulfilling prophecy most of the trading pattern don’t work most of the time on most of the stocks. It can be said from another perspective that almost all the trading patterns work some of the time, in some of the stocks almost some of the time. Now no matter how the good or bad the stock may be there is always up/down/consolidation in any sequence and the efficacy of you being a good trader lies in the fact to identify some of these trends and bet accordingly, you needn’t be right most of the time but even if you are right some of the time, you would make good money, until of course you keep your loses small.

Now as a trader you use your experience to choose good stocks about to make good moves your chances of making money rises exponentially. Many will question how do you know this etc etc? You know through experience/trial/error, have you ever been to vegetable shopping? Ever bought something cheap only to be scolded by your mother and found the quality of your purchase deplorable… What did you do next time when you went vegetable shopping? Also does expensive mean good, No! Like everything else in life trading is never easy but once you get the hang of this, even if you are right some of the time and have a knack of things you always come out green, just like the fresh vegetables… :grinning:


They don’t. They might seem to work for certain periods, but that’s just noise. If you trade any textbook pattern or publicly available strategy or system continuously , you’ll realize that none of them work in the long run, or do not give returns more than interest rates. Most lucrative patterns stop working after you discover and trade them for a few months to years (if you’re lucky) So the only way to stay alive is to have a basket of strategies and hope all of them don’t fail simultaneously.

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These pattern are nothing but the trader/investor mentallity until and unless that will change. Pattern will not get changed.

Won’t a profitable trading pattern strategy move lows higher and highs lower?

That’s the truth.
Market is not efficient at all.
Otherwise you wouldn’t have got some big scandal and then some big correction very 10-15 years.

Noone will profit if market is efficient.
Profits are generated only when we spot in efficiency in the market and bet on it getting resolved.

  1. Suppose Company A is priced at 100. If this is efficient value then there is no need to invest. Price will remain at 100 only increasing as much as inflation rates.
    But you know that this is not a true value. Either Fundamentas or technicals are not getting reflected in the prices. So you invest and wait for inefficient market to realize its mistake and move prices to 500.

Again market is not efficient in this price discovery as well. if it was efficient then the moment it realizes the true value is 500 you would have got straight UCs to 500. This doesn’t happen.

But market is not efficient at 500 as well whenever if this price is achieved. Uphoria and FoMo takes the prices to 700 unreasonably. Then Short Sellers come into picture

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If you can follow the broader markets ie the indices or the sector of the stock one is trading, then profiting becomes slightly easier rather than just betting on technicals of a stock. While it is true that certain stocks will always move up even when there is say a 2% downmove or more on the index/sector still it is recommended to swim with the tide to get even better results thus increase one’s % returns. Other than that swing/positional trading comes in different forms and shapes and time frames is a very important aspect of that. Would require a separate thread to explain it all.