There is a pretty solid hypothesis that when traders talk about "reading a chart", they are not in fact using easily explainable patterns, but rather more hardcore estimations of market psychology, derived via the brain's rather robust pattern-finding machinery. The chart patterns are more of a mnemonic than a decision rule in and of themselves.
My favorite story is a study that involved trying to predict the outcome of a 1:2 random distribution. Pull a random card from an infinite deck, 1/3rd of the time it's black, 2/3rds of the time it's red. The optimum strategy is to guess red all of the time; you will be right 2/3rds of the time. Humans have a tendency to try to match the random number generator, guessing red 2/3rds of the time and black 1/3rd of the time, which is sub-optimal, and you're only correct 5/9ths of the time.
We're powerful pattern matchers, yes: we can observe a 1:2 random distribution and mimic it pretty accurately. But we're also a little stupid: we think it's a good idea to do so.
Maybe traders have learned on an intuitive level to "fix" this pattern matching - clearly the processing circuitry / power / ability is there, so a trained difference in outlook could allow us to harness it properly.
I may get laughed out of the park for the following anecdote, but playing MMO markets for the last few decades has convinced me this is true. Take any given item to be a stock; and looking at the market trends as "Reading the charts" and you quickly realize that your mental heuristics that may be provably very successful are MUCH more difficult to put into algorithm. I came to this realization recently when I tried to put code to the logic that had earned me 10s of thousands in Guild Wars 2 and found it a far stretch from enumerating the same list of "trades to make" that I would come up with manually, even when I felt I enumerated all of my heuristics.
Long story short, the brain is a ridiculous tool; I can't wait until we understand it better.
reading a chart quickly turns into reading tea leaves and other forms of divination that people are so prone to. There is just no science there. it's better to know our brains are poorly wired for understanding the risk of trading.
