50 Chart Patterns and How to Trade Them (2026 Guide)

Chart patterns remain one of the most effective sets of tools available to traders in 2026. This is because, even with the advent of algo trading, AI trade signals, and other indicators, market behavior is still driven by psychology, market liquidity, and market structure. By recognizing these market patterns, traders can predict and profit from market movements.

This article covers 50 key chart patterns, explains how they form, and shows you how they can be traded in real market conditions. Both stock, cryptocurrency, forex, and index traders can all benefit from understanding these chart patterns.

Summary: Chart Patterns Cheat Sheet

	Pattern	Category	Bias	Key Signal
1	Head & Shoulders	Reversal	Bearish	Neckline break
2	Inverse H&S	Reversal	Bullish	Neckline break
3	Double Top	Reversal	Bearish	Support break
4	Double Bottom	Reversal	Bullish	Resistance break
5	Triple Top	Reversal	Bearish	Neckline break
6	Triple Bottom	Reversal	Bullish	Neckline break
7	Rounding Top	Reversal	Bearish	Support break
8	Rounding Bottom	Reversal	Bullish	Resistance break
9	Island Reversal	Reversal	Both	Opposing gap
10	V-Reversal	Reversal	Both	Sharp reversal
11	Bull Flag	Continuation	Bullish	Flag breakout
12	Bear Flag	Continuation	Bearish	Flag breakdown
13	Bull Pennant	Continuation	Bullish	Pennant break
14	Bear Pennant	Continuation	Bearish	Pennant break
15	Ascending Triangle	Continuation	Bullish	Resistance break
16	Descending Triangle	Continuation	Bearish	Support break
17	Symmetrical Triangle	Continuation	Neutral	Directional break
18	Rectangle	Continuation	Trend-based	Range break
19	Rising Channel	Continuation	Bullish	Channel break
20	Falling Channel	Continuation	Bearish	Channel break
21	Cup & Handle	Breakout	Bullish	Handle breakout
22	Inverse Cup & Handle	Breakout	Bearish	Handle break
23	Volatility Squeeze	Volatility	Neutral	Expansion
24	Compression Coil	Volatility	Neutral	Breakout
25	Range Breakout	Breakout	Both	Range break
26	Megaphone	Volatility	Both	Expansion break
27	Parabolic Curve	Volatility	Extreme	Exhaustion
28	Gaps	Breakout	Both	Gap hold/fill
29	Gartley	Harmonic	Reversal	D-point
30	Bat	Harmonic	Reversal	88.6% retrace
31	Butterfly	Harmonic	Reversal	Extension zone

32	Crab	Harmonic	Reversal	161.8% ext
33	Shark	Harmonic	Reversal	Extreme point
34	Wolfe Wave (Bull)	Harmonic	Bullish	Wave 5
35	Wolfe Wave (Bear)	Harmonic	Bearish	Wave 5
36	HH & HL	Structure	Bullish	Pullback hold
37	LH & LL	Structure	Bearish	Rally rejection
38	BOS	Structure	Directional	Swing break
39	ChoCH	Structure	Reversal	Failed structure
40	Equal Highs	Liquidity	Reversal	Liquidity grab
41	Equal Lows	Liquidity	Reversal	Liquidity sweep
42	Liquidity Sweep	Liquidity	Reversal	Stop raid
43	Stop-Hunt Reversal	Liquidity	Reversal	Sharp rejection
44	Fake Breakout	Liquidity	Reversal	Failed break
45	Bump & Run	Behavioral	Reversal	Trendline break
46	Quasimodo	Behavioral	Reversal	Lower high
47	Three Drives	Behavioral	Reversal	3rd drive
48	Dead Cat Bounce	Behavioral	Bearish	Weak retrace
49	Shakeout	Behavioral	Reversal	Stop sweep
50	Elliott Wave	Behavioral	Trend	Impulse wave

What Are Chart Patterns?

A chart pattern is a recognizable formation created by the price movements of an asset on a chart. These patterns are a result of human behaviors associated with fear, greed, selling, and buying pressures within financial markets. These actions, however, are repetitive and eventually create visual patterns that traders can interpret and benefit from.

For example, studies showed that the head and shoulders pattern has a success rate of up to 89% following a confirmation. On the other hand, double bottom and rising triangles have an 80% success rate.

Therefore, traders can rely on chart patterns to:

• Determine possible reversals or extensions of trends
• Predict possible price targets
• Understand market psychology behind price movements 
• Make an informed decision from a risk management perspective 

Although chart patterns themselves are not forecasting tools of perfection, when combined with confirmation signals, they improve the chances of successful trades.

How to Use Chart Patterns Correctly

Chart patterns alone cannot be relied on. Research indicates a combination of chart patterns and other indicators, RSI or MACD, can improve accuracy by as much as 31%, and a breakout is much more likely if the volume is above average by at least 50%. Therefore, traders must combine other confluences to filter any false signals provided by these chart patterns. Such other confluences include:

1. Confirmation First: Do not trade merely based on the formation of a pattern. You must wait for a price confirmation before taking any buy or sell action. For instance, when using the breakout pattern, you must wait until the price closes above the breakout point.

2. Understand the Trend and Context: Patterns perform well when they align with the major market trend. A bullish pattern in an uptrend market will perform better compared to a downtrend market. Moreover, a reversal pattern in either a downtrend or an uptrend has a good chance of playing out if you wait for confirmation.

3. Volume Analysis: Since volume can often confirm patterns, it becomes an essential element of your trading. A breakout with strong volume will be more reliable than a breakout with low volume.

4. Choose the right time frame: Signals on the larger time frames are more credible than those on lower time frames. For example, a chart pattern on the daily timeframe is more reliable than on a 4-hour chart, which is in turn stronger than those on lower timeframes.

5. Manage risk: Stop losses must be placed at areas where the pattern will fail. Even the strongest patterns may sometimes fail; hence, you must protect your money.

How This List Is Structured

These patterns are put into categories to make them easier to learn, understand, and apply:

• Trend Reversal Patterns: Indicate possible reversals of predominant trends. They include Head and Shoulders, Inverse Head and Shoulders, Double Top, Double Bottom, Triple Top, Triple Bottom, Rounding Top, Rounding Bottom, Broadening Formation, Falling Wedge (Reversal Context).

• Trend Continuation Patterns: Indicate the continuation of a predominant trend. They include Bull Flag, Bear Flag, Bull Pennant, Bear Pennant, Ascending Triangle, Descending Triangle, Symmetrical Triangle, Rectangle (Range Continuation), Rising Channel, and Falling Channel.

• Breakout and volatility patterns: Illustrate compression and possible large movements. They include Cup and Handle, Inverse Cup and Handle, Volatility Squeeze, Price Compression, Coil Range Breakout, Broadening Formation (Megaphone Pattern), Parabolic Curve Pattern, and Gaps Pattern.

• Harmonic and Advanced Geometric Patterns: These are precise setups for experienced traders. They include the Gartley Pattern, Bat Pattern, Butterfly Pattern, Crab Pattern, Shark Pattern, Wolfe Wave (Bullish), and Wolfe Wave (Bearish).

• Market Structure and Liquidity Patterns: They offer insights into institutional trading. They include Higher Highs and Higher Lows, Lower Highs and Lower Lows, Break of Structure, Change of Character, Equal Highs, Equal Lows, Liquidity Sweep Stop-Hunt Reversal, and Fake Breakout.

• Specialized and Behavioral Patterns: Less common patterns that expose market psychology. They include the Bump and Run Pattern, Quasimodo Pattern, Three Drives Pattern, Dead Cat Bounce Pattern, Shakeout Pattern, and Elliott Wave Pattern.

Each pattern explanation below shows a brief description and practical usage to help you get started right away.

1. Head & Shoulders Pattern

The Head and Shoulders pattern is one of the most reliable trend reversal patterns in technical analysis. It most often occurs following a big run-up when a big sell-off is just about to begin due to fewer buyers and more sellers starting to emerge in the markets. It symbolizes a transition of control from buyers to sellers.

How the Head and Shoulders Pattern Forms

The pattern consists of four distinct components:

• Left Shoulder: The price of an asset rallies and pulls back, resulting in the first peak. This price action signifies a strong buying pressure.

• Head: When the price moves above the left shoulder, it creates a higher peak, called the Head. A deeper pullback then follows this and shows final bullish exhaustion, where the buying forces push the price to a new high.

• Right Shoulder: To form the right shoulder, the price makes another attempt to rally but cannot go beyond the peak of the head, signaling weakness.

• Neckline: A supporting level where the two lows of the pullback meet. This level is a crucial level of confirmation. A breach of the neckline indicates dominance by sellers.

How To Trade the Head and Shoulders Pattern

• Entry: Go short or sell after a break below the neckline, that is, a candle close below the neckline. More conservative traders will wait for a test of the neckline before entering a trade.

• Stop Loss (SL): Your stop-loss level should be above the right shoulder. This level makes the reversal invalid if the price breaks above it.

• Take Profit (TP): To obtain your take-profit level, calculate the distance between the head and the neckline. Subsequently, extend that distance downward from the point where the neckline breaks.

2. Inverse Head & Shoulders Pattern

The Inverse Head and Shoulders pattern is a very reliable method for a bullish reversal in the market. This pattern usually occurs at the end of a long period of bearish trends, marking the weakening of the bears in the market and the beginning of a possible turn upwards. This market pattern represents a change in market sentiment, where the control over the market slowly transitions from the seller to the buyer.

How the Inverse Head and Shoulders Pattern Forms

The pattern contains four major elements:

• Left Shoulder: Prices fall and then move up to form the first trough. It indicates intense pressure to sell, followed by early buying interest.

• Head: The price falls below the left shoulder, making it a deeper trough, and then moves upwards again. It marks the final bearish exhaustion, where sellers push the price to a new low but fail to sustain it.

• Right Shoulder: Price declines again but fails to reach the low of the head. This signals weakness among sellers and growing buyer strength.

• Neckline: This resistance level marks the connection between the two rebound highs. This neckline represents the critical confirmation point, and breaking above it means that buyers have taken control.

How to Trade the Inverted Head and Shoulders Pattern

• Entry: To go long, there has to be a break above the neckline, which means a candle close above the neckline. More cautious traders will wait for a retest of the neckline before making an entry.

• Stop-Loss: Position the stop loss below the right shoulder. This level makes the reversal invalid in case the price falls below it.

• Take Profit: Calculate the length from the head to the neckline. Next, extend this length upwards from the neckline breakout point.

3. Double Top Pattern

The Double Top pattern is an established bearish reversal pattern that occurs after an evident uptrend. It is an indicator of weakening buying pressure with the initiation of control by the sellers. This pattern represents an inability of the buying force to push the price past a significant resistance level.

How the Double Top Pattern  Forms

The double top pattern contains three core components:

• First Top: Price moves up vigorously and marks a peak, then corrections begin. In this pattern, market buying strength is evident, as well as the development of selling pressure.

• Neckline: The pullback forms a support level. This support level becomes important for the pattern confirmation.

• Second Top: The price rallies once again and halts at around the same level as the first top, but cannot move above. It marks the dominance of resistance.

How to Trade the Double Top Pattern

• Entry: Enter a short position after a confirmed break below the neckline, meaning a candle close below the neckline. If you are a conservative trader, you may wait for a retest of the neckline before entering.

• Stop Loss: Place the stop above the second top. This level invalidates the pattern if the price breaks above it.

• Take Profit: Measure the distance from the tops to the neckline. Then project that distance downward from the neckline break.

4. Double Bottom

The Double Bottom is a traditional reversal pattern that occurs in a downtrend. The double bottom indicates that the selling pressure is declining, and buyers are taking control of the market. The Double Bottom pattern occurs when the sellers are unable to drive the prices below a specific level of support, resulting in a reversal to the upside.

How the Double Bottom Pattern Forms

Like a double top, this pattern involves three main components:

• First Bottom: Prices drop considerably and make a low, then rebound. This indicates intense selling pressure and subsequent buying interest.

• Neckline: The rebound generates a resistance level that becomes critical for verification of the pattern.

• Second Bottom: Prices fall and reach around similar levels to the first bottom, without further declining. It is a sign that sellers are losing momentum, and buyers are gaining momentum.

How to Trade the Double Bottom Pattern

• Enter: Enter a long position after a break above the neckline, indicating closing above the neckline. More conservative traders may choose to enter on the retest of the neckline.

• Stop Loss: The stop can be placed below the second bottom. This stop loss invalidates the pattern if the price breaches this level.

• Take Profit: Calculate the distance from the base to the neckline. Move that distance up from the breakout point of the neckline.

5. Triple Top Pattern

A triple top pattern is a reliable bearish reversal pattern that occurs after a strong upward trend. It indicates a decline in the strength of buyers, and sellers take over. A triple top pattern indicates a number of attempts by the buying forces to breach a specific level of resistance, ultimately resulting in a sharp fall.

How a Triple Top Pattern Forms

This pattern has four main elements:

• First Top: Price rallies and then makes a high, only to pull back, forming the first top. This indicates vigorous buying activity followed by initial selling pressure.

• Second Top: Price again rallies to about the same level as the first top, but cannot move beyond that. This indicates a weakening buying strength.

• The Third Top: Price makes another attempt to rally to the same level of resistance but fails to break through, thus ensuring the top is exhausted.

• Neckline: The retracements from each high form a level of support, which proves to be very significant. Breaking below the neckline indicates that the sellers are in charge.

How to Trade the Triple Top Pattern

• Entry: After there is a break below the neckline, that is, when there is a close below the neckline. More cautious traders may choose to enter when there is a retest of the neckline.

• Stop Loss: Place the stop above the third top. This level will render the pattern invalid if the price rises above it.

• Take Profit: Calculate the length from the top points to the neckline. Then, project downward from the neckline.

6. Triple Bottom Pattern

The Triple Bottom pattern is a trusted bullish trend reversal pattern, which usually occurs after a prolonged bear trend. It indicates a slowdown in selling momentum and the start of buying momentum. It represents the consistent failure of the sellers to allow the price to go below a significant support level, followed by a sharp upward movement.

How the Triple Bottom Pattern Forms

Four components make up the pattern:

• First Bottom: Price moves down to a certain level, then reverses. The first bottom shows that there is intense selling pressure, yet buying interest is present.

• Second Bottom: The price drops again to about the same level as the first bottom, but does not break below; this indicates exhaustion of sellers.

• Third Bottom: Price attempts to fall to the same level again but fails to breach it, confirming an increasing buying power.

• Neckline: The rebounds from the bottoms establish a level of resistance that becomes critical. Breaking above this level demonstrates that buyers are in control.

How to Trade the Triple Bottom Pattern

• Entry: Take a long position after a confirmed breakout above the neckline, with a candle close above it. You can, however, wait for a test of the neckline to confirm this entry.

• Stop Loss: Position the stop below the third bottom. This stop loss level makes the pattern invalid if the price breaks below it.

• Take Profit: Calculate the distance from the bottom to the neckline. Next, project this distance upwards from the neckline.

7. Rounding Top Pattern

The Rounding Top Pattern is a reversal pattern that is considered bearish. It tends to occur after an extended uptrend. It generally indicates a declining buying momentum and that the sellers are slowly taking over. This pattern is a transition in the market psychology from bullish to bearish.

How the Rounding Top Pattern Forms

This pattern has four key elements:

• Left Side of the Top: The price increases steadily, but it slows down, reflecting that the buyers are losing momentum.

• Peak (Top): Price reaches a rounded top, completing the peak of the pattern. At this stage, buyers attempting to move prices higher are hampered, while selling pressure begins.

• Right Side of the Top: Price starts to drop steadily, similar to the left side. It signifies sellers are in control.

• Neckline/Support Level: The support level is created at the bottom of the pattern. A breakdown below this level confirms the bearish reversal.

How to Trade the Rounding Top Pattern

• Entry: Enter a short position once there is a confirmed break below the level of support (neckline), with a candle close. You may wait for a retest of the neckline before making an entry.

• Stop Loss: Position the stop above the peak of the rounded top. This invalidates the pattern if the price crosses above.

• Take Profit: Calculate the distance from the peak to the support point, and extend it down from the point of the neckline breakout.

8. Rounding Bottom Pattern

The rounding bottom is another bullish reversal pattern that usually appears after a prolonged downtrend. It is an indication of a weakening selling momentum and an emerging buying interest.

How the Rounding Bottom Pattern Forms

The structure has four primary elements:

• Left Side of the Bottom: Prices begin to fall but slow down, showing a declining seller's momentum.

• Trough (Bottom): The price falls into a rounded bottom, creating the foundation. The sellers cannot force the price lower, and the buyers enter the market.

• Right Side of the Bottom: Prices move up slowly in line with the left side. This indicates that buyers are gaining control.

• Neckline/Resistance Level: The resistance level is located at the top of the pattern. Breaching this resistance level confirms a bullish reversal.

Trading the Rounding Bottom Pattern

• Entry: You should enter a long position after the break of the resistance level (neckline), that is, after a candle closes above it. You may also wait and enter after the retest of the resistance level.

• Stop Loss: The stop loss must be placed below the trough in the rounded bottom pattern. This invalidates the pattern in case the price goes below it.

• Take Profit: Calculate the distance from the trough to the resistance level. Then extend that distance upward from the neckline breakout.

9. Island Reversal Pattern

The island reversal pattern is a strong trend reversal pattern that may develop at the peak of an uptrend or the trough of a downtrend. It indicates a strong market sentiment shift, which often occurs when a gap isolates a cluster of price action (“the island”), and then the trend suddenly reverses.

How the Island Reversal Pattern Forms

This pattern has four main parts:

• Leading Gap: Price gaps in the direction of the existing trend, creating separation from previous price action. This shows strong continuation momentum before the reversal.

• Island Formation:  A cluster of price action forms isolated from prior trading activity, creating the “island.” This area represents exhaustion of the current trend.

• Trail Gap: Price gaps contrary to the initial trend, solidifying the reversal. This type of gap represents an abrupt transition of power from buyers to sellers in the case of a top or from sellers to buyers in the case of a bottom.

The closing of the gap shows that the trend has reversed because the isolated island is being left behind.

How to Trade the Island Reversal Pattern

• Entry: Enter a trade in the direction of the reversal, after the trailing gap has closed, to confirm the reversal pattern. Conservative traders may wait for a retest of the area of the gap.

• Stop Loss: Place the stop above the leading gap for a bearish reversal or below the leading gap for a bullish reversal. This level becomes invalidated if the price reverses back into the island.

• Take Profit: Measure the height of the island from the gap start to the end of the cluster and project it in the direction of the reversal.

10. V-Reversal Pattern

The V-Reversal pattern represents a decisive and definitive reversal pattern that occurs after the completion of a strong upward or downward trend. This pattern indicates a sudden change in the market movement as a result of one side being overpowered by the other due to either panic buying or selling.

How the V-Reversal Pattern Forms

The pattern consists of four main components:

• Steep Trend Move: This move sees a rapid price directional change, either up or downwards, due to increased momentum in trends.

• Exhaustion Point: Momentum will start slowing down when buyers or sellers attain extreme levels, thus showing that the trend is losing steam.

• Sharp Reversal: An immediate reversal of price, forming the shape of the letter “V.” This indicates a swift change in market dominance from seller to buyer (for a bottoming pattern) or from buyer to seller (for a topping pattern).

• Confirmation: Price continues to move in the new direction, confirming the turnaround. This is usually when volume surges, emphasizing the change in market power.

How to Trade the V Reversal Pattern

• Entry: Enter the trade in the direction of the reversal once it is confirmed, usually after a close beyond the point of exhaustion. Conservative traders may choose to wait for further confirmation, such as a retest.

• Stop Loss: Stop loss is beyond the extreme of the initial trend. It will be violated if the price continues moving in the initial trend.

• Take Profit: The distance from the extremity of the first trend to the reversal point is measured and projected in the new direction.

11. Bull Flag Pattern

The bull flag is a type of bullish continuation pattern that occurs during an uptrend. The pattern indicates a brief pause in the trend, but with an upward continuation afterwards. It shows where the buyers momentarily take profits.

How the Bull Flag Pattern Forms

• Flagpole: Represents a strong advance, forming the starting momentum.

• Flag: Price is consolidating through a narrow, downward-sloping channel, indicating pullback or profit-taking.

• Breakout: Price breaks above the top boundary of the flag formation, marking continuation of the upward trend.

How to Trade the Bull Flag Pattern

• Entry: Enter a long position after the price crosses the top boundary of the flag formation, preferably on heavy volume.

• Stop Loss: Position the stop below the lower boundary of the flag. 

• Take Profit: The height of a flagpole needs to be measured, then projected from the point of breakout.

12. Bear Flag Pattern

It is a bearish continuation pattern made during a downtrend. It represents a pause in the trend to resume the downtrend. It represents the temporary support of the trend by the buyers, and afterwards, the sellers take over.

How the Bear Flag Pattern Forms

• Flagpole: The sharp downward movement represents the initial momentum.

• Flag: The price consolidates within a narrow upward-sloping channel.

• Breakout: The price drops below the lower boundary of the flag, indicating the continuation of the downward trend.

How to Trade the Bear Flag Pattern

• Entry: Take a short position if the price slips below the lower boundary of the flag, preferably on high volumes.

• Stop Loss: Position stop above the upper boundary of the flag.

• Take Profit: Calculate the height of the flagpole and extend it downwards from the breakdown point.

13. Bullish Pennant Pattern

A bull pennant is a bullish continuation pattern that occurs when markets are experiencing a strong uptrend. Such a pattern highlights a short period that signals a brief pause prior to continuing the overall bullish move.

How the Bull Pennant Pattern Forms

• Flagpole: A strong upward movement constitutes the initial momentum.

• Pennant: Price forms a small symmetrical triangle, indicating that buying momentum has momentarily slowed.

• Breakout: There is a price movement above the upper edge of the pennant, indicating the continuation of the uptrend.

How to Trade the Bullish Pennant Pattern

• Entry: After the price has crossed above the upper boundary of the pennant formation, enter long on higher volumes.

• Stop Loss: Position the stop loss below the lower boundary of the pennant. 

• Take Profit: Measure the height of the flagpole and extend that height above the breakout point.

14. Bearish pennant pattern

This is a bearish continuation pattern appearing in a strong downtrend, indicating a short-term pause before continuing a downward trend.

How the Bear Pennant Pattern Forms 

• Flagpole: The strong downwards movement provides the initial momentum.

• Pennant: Price is consolidating in a small symmetrical triangle, slightly upwards or sideways.

• Breakdown: Price has broken below the lower boundary of the pennant, indicating that the downtrend has continued.

How to Trade the Bear Pennant Pattern

• Entry: Go short after breaking below the bottom boundary of the pennant, preferably with greater volume.

• Stop Loss: The stop should be placed above the top boundary of the pennant. 

• Take Profit: Calculate the height of the flagpole and extend it downwards from the point of breakdown.

15. Ascending Triangle Pattern

An ascending triangle basically marks a bullish continuation pattern that emerges within the frame of an upward market trend. Such an Ascending Triangle signals that the buying momentum is rising while that of the sellers is diminishing. This is an accumulation phase that precedes continuation.

How the Ascending Triangle Pattern Forms

• Flat Resistance: The price tests a flat resistance level but fails to cross it at first.

• Rising Support: Every retracement makes a higher low, which indicates rising support.

• Breakout: Price eventually breaks above the resistance level, indicating that the trend will continue.

How to Trade the Ascending Triangle Pattern

• Entry: Go long on a confirmed breakout above the flat resistance level on high volume.

• Stop Loss: Position the stop below the support trend line moving up.

• Take Profit: Calculate the height of the triangle and extend it upwards from the point of the breakout.

16. Descending Triangle Pattern

A descending triangle is a type of bearish continuation pattern and usually occurs in a downward market trend. It indicates the increasing power of the sellers and the weakening of the buyers.

How the Descending Triangle Pattern Forms

• Flat Support: The price repeatedly touches a flat level of support but cannot sustain it.

• Falling Resistance: Every rally makes a lower high, an indication of growing sell pressure.

• Breakdown: The price breaks below the support level, thus validating the continuation of the downtrend.

How to Trade the Descending Triangle Pattern  

• Entry: Go short after a confirmed break below the flat support level, preferably on heavy volume.

• Stop Loss: Position the Stop above the falling resistance line. 

• Take Profit: It is the vertical height of the triangle projected down from the breakdown point.

17. Symmetrical Triangle Pattern

A symmetrical triangle is a type of continuation pattern that may be found in an uptrend or a downtrend. It points to a phase of balance among the buying and selling forces prior to the resumption of the initial trend. A Symmetrical Triangle embodies indecision in the market, which may eventually turn in favor of the dominant trend.

How the Symmetrical Triangle Pattern Forms

• Converging Trendlines: Price forms a series of lower highs and higher lows, creating two converging trendlines.

• Consolidation: Trading volume often decreases as the triangle progresses, indicating reduced volatility.

• Breakout / Breakdown: Price eventually breaks out in the direction of the prior trend, confirming continuation.

How to Trade the Symmetrical Triangle Pattern

• Entry: Make an entry trade in the direction of the breakout after the close, beyond the trend line of the triangle. Conservative traders may wait for a re-test of the breakout.

• Stop Loss: Position the stop just beyond the other side of the triangle. 

• Take Profit: Measure the vertical height of the triangle and project this height from the point of the breakout.

18. Rectangle (Range Continuation) Pattern

The rectangle pattern is a trend-continuing pattern in which the market makes a flat movement between support and resistance lines, which are horizontal in nature. It is a stage in which there is a balance between the buying and selling forces in the market.

How the Rectangle Pattern Forms

• Horizontal Support: Price shows recurring buying support at a certain support level.

• Horizontal Resistance: The price experiences pressure to sell at a resistance level.

• Breakout/Breakdown: The price will break out or break down from the rectangle in the trading direction indicated by the previous trend.

How to Trade the Rectangle Pattern

• Entry: Long after the price moves above the resistance (for a buy signal) or below the support (for a sell signal) with an increase in volume.

• Stop Loss: The stop-loss will be set inside the rectangle, below support if selling or above resistance if buying. 

• Take Profit: Measure the height of the rectangle and extend this height in the direction of the breakout or breakdown.

19. Rising Channel

This is a bullish reversal pattern where the price rises between two parallel lines. It indicates that the price is moving in a trend with strong support and resistance levels, with a steady demand and occasional corrections in the trend.

How the Rising Channel Pattern Forms

• Lower Trendline (Support): The price finds regular buying interest in an upward-sloping support line.

• Upper Trendline (Resistance): The stock encounters selling pressure against the parallel resistance line.

• Channel Movement: The price movement between support and resistance defines the channel.

• Breakout: A breakout above the upper trend line will confirm acceleration of the bullish trend. However, a breakdown of the support line causes price to fall.

How to Trade the Rising Channel Pattern

• Entry Rules: Go long after a breakout above the upper trend line or enter around the support trend line in the channel. If price breaks the support line, wait for a retest to enter a sell.

• Stop Loss: Position the stop just below (for a buy) or above (for a sell) the support trend line. 

• Take Profit: Measure the width of the channel and extend it beyond the breakout or breakdown point.

20. Falling Channel

This is a bearish continuation pattern that forms when prices fall between two parallel trendlines. It signals a bear market in which sellers are in control, although with periodic pullbacks.

How Falling Channel Pattern Forms

• Upper Trendline (Resistance): Price consistently faces selling pressure along a downward-sloping resistance line.

• Lower Trendline (Support): Prices exhibit temporary buying support close to a parallel support line.

• Channel Movement: Price bounces between Resistance and Support, creating the shape of the downward channel.

• Breakdown: A fall below the lower trend line confirms the bearish trend. However, a breakout of the upper trend signals reversal of the trend.

How to Trade the Falling Channel Chart Pattern

• Entry: Go short after a confirmed breakdown below the lower trendline, or sell close to the resistance trendline within the channel. Alternatively, if the resistance line gets broken, go long, preferably after a retest.

• Stop Loss: Position the stop just above the upper trendline resistance (for a sell) or below it (for a buy).

• Take Profit:  Measure the width of the channel and extend it beyond the breakout or breakdown point.

21. Cup and Handle Pattern

This is a bullish continuation pattern that indicates a pause in an uptrend before it resumes afterward. It represents a phase of consolidation and taking profits.

How the Cup and Handle Pattern Forms

• Cup: Price makes a rounded bottom that is like a 'U’ shape, which indicates gradual consolidation after an uptrend.

• Handle: The small pullback/sideways moves appear on the right side of the cup, showing a minor selling pressure.

• Breakout: Price moves above the resistance created by the rim of the cup, marking the continuation of the uptrend. The breakout must, however, close with a body candle.

How to Trade the Cup and Handle Pattern

• Entry: Go long after a breakout above resistance in the handle, preferably on heavier volumes. You might as well wait for a retest.

• Stop Loss: Position the stop below the handle's low. 

• Take Profit: Measure the depth of the cup and extend it up from the breakout point.

22. Inverse Cup and Handle Pattern

This is a bearish continuation pattern that appears in a trending market, specifically a downtrend. However, it represents a reversal in an uptrend, with the handle being an inverse cup and handle shape.

How the Inverse Cup and Handle Pattern Forms

• Cup: Price traces a rounded top, like an inverted “U,” indicating a process of gradual consolidation following a downward trend.

• Handle: A minor retracement to the upside takes place, indicating buying interest.

• Breakdown: Price movements below the handle's support indicate a continuation of the downtrend.

How to Trade the Inverse Cup and Handle Pattern

• Entry: Enter a short position once there is a confirmed break below the handle’s support level, preferably on higher volume.

• Stop Loss: Position the stop above the handle’s high. 

• Take Profit: Measure the height of the inverted cup and extend that measurement downward from the point of breakdown.

23. Volatility Squeeze Pattern

The volatility squeeze is a breakout pattern that indicates the presence of low volatility before a strong directional breakout. It is a market consolidation area where market forces of buying and selling are evenly balanced, thus setting the stage for a strong market breakout.

How the Volatility Squeeze Pattern forms

• Narrowing price range: Prices move in a tight range, which causes the squeeze.

• Volatility: Bollinger Bands are shrinking. This suggests that the level of market volatility is low.

• Breakout or Breakdown: Prices are forced to break out of the range, usually in a massive manner, on whichever side control was gained.

How to Trade the Volatility Squeeze Pattern

• Entry: To enter, wait until the price moves outside the squeeze range in the direction of the breakout, preferably with increasing volume.

• Stop Loss: Your stop loss should be inside the squeeze, below the level of support for long trades and above the level of resistance for short trades.

• Take Profit: Calculate the size of the squeeze and extend that value in the direction of the breakout.

24. Price Compression Coil Pattern

The price compression coil is a breakout pattern that occurs when the price compresses into a tight range, foreshadowing a major momentum run. It indicates a period of uncertainty and decreasing volatility before momentum resumes.

Formation of the Price Compression Coil Pattern

This pattern consists of the following components:

• Converging Price Range: Highs and lows converge, making a coil-like pattern.

• Decrease in Volume: Trade is usually less during a coil phase.

• Breakout or breakdown: Prices leave the coil with a strong move in any direction, indicating the onset of a new trend. 

How to Trade the Price Compression Coil Pattern

• Entry: Enter after a confirmed breakout above the level of the coil, ideally with rising volume.

• Stop Loss: Position the stop-loss level immediately inside the coil on the opposite side of the breakout.

• Take Profit: Measure the width of the coil and extend it in the breakdown direction.

25. Range Breakout Pattern

This is a continuation or reversal pattern that occurs when the price consolidates inside an identified range and then bursts out with significant intensity. It denotes a situation of temporary market equilibrium whereby the market finally develops a clear preference for a particular trend.

How the Range Breakout Pattern Forms

• Support Level: The price consistently shows buying interest at the horizontal support level.

• Resistance Level: Price is consistently faced with selling pressures along a horizontal resistance line.

• Breakout / Breakdown: Price eventually moves above the resistance level (bullish) or below the support level (bearish).

How to Trade the Range Breakout Pattern

• Entry: Entry is on a breakout above resistance or a breakdown below support after confirmation, preferably with increasing market volumes.

• Stop Loss: Position the stop within the range, below support levels in long positions or above resistance in short sales.

• Take Profit: The height of the range needs to be measured and projected in a breakout or breakdown direction.

26. Broadening Formation (Megaphone Pattern)

The broadening formation or megaphone pattern is a volatility expansion pattern that forms when price swings widen over time. It is an indication of rising indecision and market volatility, before a strong breakout.

How the Broadening Formation Pattern Forms

• Widening Highs and Lows: Each subsequent high and low is further apart, making a megaphone pattern.

• Volume Fluctuations: Trading volume often increases during each swing.

• Breakout/Breakdown: Price demonstrates a strong directional move out of the pattern, indicating confirmation of momentum.

How to Trade the Broadening Formation Pattern

• Entry: Engage the trade in the correct direction of the breakout after confirmation, ideally with the benefit of volume participation.

• Stop Loss: Position the stop inside the pattern, behind the closest swing high or low on the opposite side of the breakout point.

• Take Profit: The distance from the first swing high to the first swing low will be measured, then projected in the breakout direction.

27. Parabolic Curve Pattern

The parabolic curve is a volatility expansion pattern that occurs as a result of accelerated price movements in one direction, resulting in an exponential curve. The pattern is an indication of remarkable momentum. It signals strong momentum and often precedes a sharp reversal or continuation, depending on market context. This pattern reflects extreme buying or selling enthusiasm.

How the Parabolic Curve Pattern Forms

• Steep Trend: Price moves in a parabolic pattern with strong momentum.

• Exhaustion Point: Speed decreases when buyers/sellers attain an extreme point, indicating a possible reversal or consolidation in the market.

• Confirmation: A breakout in the trend’s direction or a reversal indicates confirmation of the pattern.

How to Trade the Parabolic Curve Pattern

• Entry: Enter a trade in the direction of the parabolic movement if the trend persists, or be prepared to reverse if a confirmed signal of exhaustion is generated. 

• Stop Loss: Set stop just beyond the curve’s extreme point. 

• Take Profit: Evaluate the initial run before the curve’s steep acceleration and extend it into the future, factoring in market considerations.

28. Gaps Pattern

A Gaps Pattern can be a reversal or a breakout pattern, formed when the market gaps above or below the previous close by a significant amount. This type of pattern represents an abrupt change in market sentiment in response to news or earnings announcements.

How the Gaps Pattern Forms

• Gap Up / Gap Down: The asset opens higher (Gap Up) or lower (Gap Down) than the previous close, resulting in a gap being visible on the chart.

• Continuation or Reversal: Gaps can represent continuations or reversals in price movements, such as in breakaway gaps or exhaustion gaps.

• Confirmation: The price action that fills the gap or extends beyond the gap confirms the pattern.

How to Trade the Gaps Pattern

• Entry: Make a trade in the direction of the gap if momentum persists, or trade the gap fill if the reversal indicated by technical analysis is confirmed.

• Stop Loss: Position the stop loss slightly below the gap for a long trade and slightly above for a short trade. 

• Take Profit: Measure the size of the gap or previous swing levels for profit targets.

29. Gartley Pattern

The Gartley Pattern is a reversal pattern that includes the use of Fibonacci retracement levels to identify probable points of market reversal. This pattern may be bearish or bullish.

How the Gartley Pattern Forms

• X-A Leg: The initial trend move.

• A-B Leg: Retracement of X-A, usually 61.8% of X-A.

• B-C: Retracement of A-B, between 38.2% and 88.6%

• C-D Leg: Last move that completes the pattern; projecting reversal at 78.6% retracement of X-A.

How to Trade the Gartley Pattern

• Entry: After identifying reversal signals, enter a trade at point D.

• Stop-Loss: Position the stop loss slightly beyond point X.

• Take Profit: Use either the Fibonacci extension or previous swing highs and lows to set targets.

30. Bat Pattern 

The Bat Pattern is another reversal pattern that is similar to the Gartley Pattern but has deeper retracement levels. This pattern also warns of a high-probability reversal once completed.

How the Bat Pattern Forms

• X-A Leg: Initial move.

• A-B Leg: Retracement of X-A, typically 38.2%–50%.

• B-C Leg: Retracement of A-B, usually 38.2%–88.6%.

• C-D Leg: Completion at 88.6% retracement of X-A, indicating potential reversal.

How to Trade the Bat Pattern

• Entry: Enter at point D after reversal confirmation.

• Stop Loss: Set slightly beyond X.

• Take Profit: The target can be measured on previous swings or Fibonacci extensions.

31. Butterfly Pattern

Butterfly pattern is a reversal pattern that appears towards the end of a trend, relying on Fibonacci extension levels for accurate entry points. It is an indication of trend exhaustion, meaning that a reversal is likely to happen.

How the Butterfly Pattern Forms

• X-A Leg: Initial trend move.

• A-B Leg: Retracement of X-A, usually 78.6%.

• B-C Leg: Retracement of A-B, typically 38.2%–88.6%.

• C-D Leg: Extension beyond X, usually 127%–161.8%, marking the reversal zone.

How to Trade the Butterfly Pattern

• Entry: Enter a trade at point D after identifying reversal signals.

• Stop Loss: Position just beyond the point D.

• Take Profit: Fibonacci retracement of C-D leg or prior swing points.

32. Crab Pattern

The Crab Pattern is an extreme reversal pattern with a long C-D leg, designed for precise entry at the trend’s end. It’s highly accurate if correctly measured with Fibonacci ratios.

How the Crab Pattern Forms

• X-A Leg: Initial trend move.

• A-B Leg: Retracement of X-A, typically 38.2%–61.8%.

• B-C Leg: Retracement of A-B, usually 38.2%–88.6%.

• C-D Leg: Extension to 161.8% of X-A, forming the reversal zone.

How to Trade the Crab Pattern

• Entry: Enter at point D after reversal confirmation.

• Stop Loss: Place slightly beyond D.

• Take Profit: Use the Fibonacci extensions of the C-D leg or previous swing points.

33. Shark Pattern

The shark pattern is a reversal pattern that makes use of the Harmonic reversal pattern to predict changes in the market trend through the application of Fibonacci ratios. The Shark Pattern occurs at or near the extremes of price swings.

How the Shark Pattern Forms

• Point O-X: The initial strong price move, the impulse leg. 
• Point X-A: A retracement of the O-X leg, typically 38.2% to 61.8%.
• Point A-B: A deeper retracement or extension, usually 113% to 161.8% of the X-A leg.
• Point B-C: The final leg that completes the pattern, often an extension of the O-X leg (113% to 224%) and extending past point A.
• Potential Reversal Zone (PRZ): The area around point C where the pattern completes and a reversal is expected, defined by the confluence of Fibonacci levels

How to Trade the Shark Pattern

• Entry:  Buy when price moves up from C, often at the open of the next candle after confirmation. However, sell when price moves down from C, using similar confirmation.

• Stop Loss: Place your stop loss just below C (for bullish) or above C (for bearish), or at the 113% Fibonacci extension of XA for added safety.

• Take Profit: 50% to 61.8% retracement of the BC leg or the XA leg or the 1.618 extension of the BC leg.

34. Wolfe Wave (Bullish)

The bullish wolfe wave is a reversal and continuation pattern, which denotes a strong advance in prices once five specific waves are formed in a pattern reflecting natural market rhythms and balance for supply and demand.

How the Bullish Wolfe Wave Forms

• Wave 1-5: Price forms five waves, with wave 5 completing at the trendline connecting Waves 1 and 3.

• Reversal: The price rises towards the target line connecting Waves 1 and 4.

How to Trade a Bullish Wolfe Wave

• Entry: Enter a long trade around wave 5.

• Stop Loss: place below Wave 5 low.

• Take Profit: Target line from waves 1 through 4, or Fibonacci extensions.

35. Wolfe Wave (Bearish)

Bearish wolfe waves are the reverse of the Bullish Wolfe Waves, indicating a strong downtrend. They appear after a five-wave trend, indicating a forecast of a price drop.

Formation of the Bearish Wolfe Wave

• Wave 1-5: The price makes five waves, with wave 5 close to the line joining Waves 1 & 3.

• Reversal: Price falls downwards to the target line drawn between Waves 1 and 4.

How to Trade the Bearish Wolfe Wave

• Entry: Make a trade around the wave 5 point.

• Stop Loss: Position above wave 5 high. 

• Take Profit: Target line from waves 1 to 4, or use Fibonacci extensions.

36. Higher Highs & Higher Lows

It signals an extremely strong trend in the asset, which in this case is an uptrend, as every high has been higher than the previous, with the lows also being higher.

How to Trade It

• Entry: Buy on pullback to higher lows with a stop loss below the previous low. 

• Take Profit: Can be based on the trend or important resistance points.

37. Lower Highs & Lower Lows

This pattern shows that the downtrend is strong. Each successive high is lower than the previous, and each low is also lower, showing sellers in control.

How to Trade It

• Entry: Short on rallies to lower highs with a stop loss above previous highs.

• Profit Target: Follow the trend or important support levels.

38. Break of Structure (BOS)

Break of Structure refers to the moment the price breaks a significant high or low level, indicating a possible market change or extension.

How to Trade It

• Entry: Enter in the direction of the BOS after a retracement into a previous swing point. 

• Stop loss: Place beyond the previous swing point.

• Take profit: Targets depend on prior swing points.

39. Change of Character (ChoCH)

The Change of Character pattern signals a shift from bullish to bearish behavior, or vice versa. It often precedes breakouts or reversals, and it is characterized by a failure to form a new high (for the uptrend) or a new low (for the downtrend). Instead, a breach of the previous swing level (high-low or low-high) occurs, usually indicated by a higher low or lower high, meaning that buyers or sellers lose dominance and may initiate a fresh market trend.

How to Trade It

• Entry: Enter after confirmation of the ChoCH with a candle close 

• Stop loss: Place beyond the reversal point. 

• Take Profit: Profit targets can be previous swing highs/lows.

40. Equal Highs

Equal Highs form when the price tests a resistance level multiple times but fails to break above. This often signals liquidity accumulation above the highs.

How to Trade It

• Entry: Enter on a confirmed reversal off  resistance. 

• Stop Loss: Place just above the resistance. 

• Take Profit: Target a previous swing point.

41. Equal Lows

Equal lows occur when price tests support multiple times but fails to break below. This indicates liquidity demand at support.

How to Trade It 

• Entry: Enter on a confirmed reversal off support. 

• Stop loss is placed below the support. 

• Take Profit: Target a previous swing point.

42. Liquidity Sweep

A liquidity sweep happens when the price moves beyond key highs or lows to capture stop orders, then reverses. It reflects manipulation by large market participants.

How to Trade It

• Trade in the direction opposite the sweep after confirmation. 

• Place stop loss beyond the sweep’s extreme and project profit based on prior swing structures.

43. Stop-Hunt Reversal

The Stop-Hunt Reversal is a pattern where price triggers stop orders to create momentum, then reverses sharply. It is common around support/resistance.

How to Trade It

• Entry: Enter after the reversal candle is confirmed.

• Stop loss is placed beyond the extreme of the stop hunt, with profit targets at swing highs/lows.

44. Fake Breakout

A fake breakout occurs when the price temporarily breaks a level but quickly reverses, trapping breakout traders. It reflects false momentum before the real move.

How to Trade It

• Trade in the direction of the true breakout after confirmation. 

• Stop loss is beyond the fake breakout extreme, and profit targets follow prior swing levels or measured moves.

45. Bump and Run Pattern

The Bump and Run Pattern signals an impulsive move followed by a sharp correction. It reflects overexuberance by traders before the market corrects.

How to Trade It

• Entry: Enter in the direction opposite the “bump” after confirmation of the reversal. 

• Stop loss is placed beyond the extreme of the bump. 

• Take Profit: Targets are measured by the size of the bump projected into the reversal.

46. Quasimodo Pattern

The quasimodo pattern is a reversal pattern that is marked by a sequence of higher highs and higher lows, which are then followed by a lower high, indicating a trend change.

How to Trade It

• Entry: Enter after the price breaks the lower low confirmation. 

• Stop loss is above the lower high (the Quasimodo “shoulder”), with profit targets at prior support or measured move levels.

47. Three Drives Pattern

The three-drive pattern is a reversal pattern consisting of three consecutive symmetrical price swings with specific Fibonacci extensions. It signals exhaustion of the current trend.

How to Trade It

• Entry: Enter at the completion of the third drive with a stop loss beyond the final swing.

• Take profit targets can use Fibonacci retracement or prior structure levels.

48. Dead Cat Bounce Pattern

The dead cat bounce pattern is a market turn in a declining trend where prices rebound only temporarily before the trend continues downward.

How to Trade It

• Entry: Short trades can be considered when the bounce has exhausted its upside momentum. 

• Stop loss would be above the highest point of the bounce, and the targets are in line with the downward continuation of the trend.

49. Shakeout Pattern

The Shakeout Pattern is where the price falls initially to activate the stop-loss orders and then turns back up, indicating market manipulation by stronger market participants.

How to Trade It

• Entry is made after the reversal is confirmed. 

• Stop loss is below the lowest point of the shakeout. 

• Profit targets follow prior resistance levels or trend continuation.

50. Elliott Wave Pattern

The Elliott Wave Pattern is a type of behavioral and predictive model that uses a series of waves, both impulsive and corrective, to determine cyclic trends. It reflects collective market psychology.

How to Trade It

• Entry: Enter during impulsive waves in the direction of the primary trend. 

• Stop loss is placed beyond the preceding corrective wave. 

• Profit targets are based on Fibonacci extensions or wave projections.

Best Timeframes for Chart Patterns

The right time frame selection is an essential consideration for successful trading using chart patterns. Different timeframes suit different trading styles, and understanding this helps traders align their strategies with market context.

• Scalping: Involves working on very short charts ranging from 1 to 5 minutes. Patterns on the chart are fast but can be noisy.

• Day Trading: Traders use 15-minute to 1-hour charts. The patterns give more reliable trading signals in intraday trading.

• Swing Trading: Uses 4-hour to daily charts. Patterns are more dependable and support bigger profit targets.

However, trading these chart patterns on higher timeframes is more reliable because there is less market noise,  more substantial price actions, and greater confirmation of trends. Also, patterns on higher timeframes usually represent institutional participation.

Common Mistakes Traders Make With Chart Patterns

Even professional traders are prone to pitfalls when dealing with chart patterns. Awareness of these pitfalls prevents losses and increases trade accuracy.

1. Lack of Confirmation: Relying solely on patterns, without volume confirmation or confirmation with other indicators, may result in pattern failure. Therefore, confirm patterns with volume and other technical indicators.

2. Emotional Trading: Letting fear or greed drive decisions may result in chasing trades or holding losers too long. However, you can avoid this by sticking to your trading plan and being disciplined.

3. Trading patterns in isolation: Relying on chart patterns alone rather than market context or trend could result in unprofitable trades. It is, therefore, imperative to examine the overall market structure and trend before placing your trades. Patterns would not likely work when looked at out of context.

4. Poor Risk Management: Even if your trades align with the right chart patterns and market context, without proper risk management, you can still be unprofitable. Failing to set proper stop losses, over-leveraging positions, or targeting unrealistic take profit points could mar your trades. Therefore, use stops and proper position sizing based on pattern structure and volatility to manage risk.

5. Chasing the Market: Jumping into a trade after the pattern has already moved significantly, missing the optimal entry, is another common mistake. However, you should wait for the proper setup and entry.

6. Misinterpreting Pattern Failures: Not accounting for the fact that patterns fail (20-30% of the time) and getting caught in false breakouts. You should accept losses and manage risk when patterns don't play out.