Yep, there's a bullshyte and bearshyte in pattern analysis. People see the things they want to see.
However, there's a e.g. guy who's very good (genuinely) at analysing patterns with the volumes traded and how the markets (for which these days, read "the bots" react. MIchael Nauss of Statsedge Trading. He's written algorithms and been adjusting them for a long time backtesting them over past decades. (He's a "Chartered Market Technician". Read in to that whatyou will, but it's pretty rigorous.) The patterns do repeat, and therefore predict with high statistical significance, what happens next.
He sells his predictions, but gives one a week free. Recently I watched one which ran over a couple of days. Petfood supplier, ticker $WOOF. He was spot on. It was on his X feed on a Thursday or Friday) I bought a whole $100 short when he said it would fall, and it did, about 5%. I don't remember one of his
favourite calls going wrong. They are slowish - a few days is typical, so if they head in the wrong direction you can abort.
5% may not sound like a fortune, but 5% a week is over 1200% in a year.
I could point to folk who use very complex thinking and win a lot more than I ever will. I'm not in their league so I stick to simple stuff. The simple stuff may be lower % return, but it works well enough for me.
A simple thing I've used dozens of times and explained here many times, happened again yesterday:
There are half a dozen companies linked to the bitcoin price, with positive correlations overall.
You might think Bitcoin is a pointless thing, and I might agree, but it exists and you can use it. It's driven by sentiment mostly, which waxes and wanes. Analysts are saying they think the price will go up. That's enough for the price to go up.
So I don't do anything pre-emptive, mostly, but watch the pointers which exist.
Then if BTC does go up, see if the acolytes are doing the same. Usually one or two refuse and one or two are enthusiastic.
One such is Microstrategy, ticker $MSTR, I've described using, here, many times (but not as much as $MARA).
[There is also a UK based ETF called LMI3 whose daily change is 3x $MSTR day % change. MSTR up 2% means LMI3 up 6%. Don''t go anywhere near it if you don't fully understand what can happen. Of which more later.
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So Bitcoin BTC and $MSTR yesterday.
Points to notice:
1) Bitcoin is moving up, as expected, in the premarket. That's a sign with high % reliability for a usable follow-on
2) MSTR is also creeping up in the premarket.
3) Usually, the acolytes such as $MSTR go up much faster than bitcoin. $MSTR is often the fastest at least for a while, but the "spread" is much wider than say $MARA. (Google "Spread" if necessary),
4) Often, there's a jump at the official market open time, when the big volumes come in. Many platforms allow trading in the premarket. $COIN is available to trade for me for more hours before and after market hours, showing similar but slower trends. I used that quickly but don't want to overcomplicate the description)
So I bought $MSTR let's say AT the market open.
The "11" means the start of the 11th October, but the time scales differ after that.
Vertical dashed blue line is 14:30 for BTC, 00:00
and 14:30 for MSTR.
BTC is always "open" so you can see what it's doing - rising.
The US market opens at 14:30 but that MSTR chart doesn't show before that (ie any between midnight and 14:30), this one does:
yes that counts as rising , on low volume.
Outcome - BTC rose about 4.5% on the day.
MSTR rose as the blue box says, about 14.5%.
Any "CFD" trading platform allows you a leverage of 5x, which applies to gains and losses.
So my investment rose 5 x 14.5 = 72.5%.
So £1000 rose £750
£100k rose £75k, less tax which if KS does what we expect, will leave 41k.
(If you use a Spread Betting platform, you may or may not pay tax. Likely to, in future)
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Back to that LMI3 fund.
You can't use LMI3 in a CFD account.
You can't use CFD in an ISA.
But you CAN use leveraged funds (there are dozens) such as that LMI3, in some ISAs.
But you can't trade it after 16:30 when the UK market closes. You can leave it, but you may have a nasty shock the next day.
So in an isa you'd have
That one is riskier because the spread is 2% and it can bite.. Try it in a simulator some time and you'll see after a few experiences. I don't just let it run. I'm twitchy, which affords some protection but reduces the gain - I got 22% which is OK. Tax free though.
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Do I get losses - yes of course.
The most annoying are when I make a mistake - "fat finger".
The biggest in the last month was 4%.
Some gains were only a couple of %.
Many days are "flat", so nothing moving. Better to watch Bloomberg or some pundit's thoughts, or keep looking for Funds which are doing well. I go through all the "wealth managers'" scanners to see what's doing well consistently.
Biggest loss ever was 30% through a combination of factors, That's why I only use winnings.
I have had no losses on trades like the one described, though.
