Chart Patterns Dictionary
Visual guide to identifying and trading chart patterns
Understanding Pattern Categories
Reversal Patterns
Signal potential trend changes. Appear at market tops and bottoms.
Continuation Patterns
Suggest the current trend will continue after a brief pause.
Bilateral Patterns
Can break in either direction. Wait for confirmation before trading.
Reversal Patterns
Head and Shoulders
High ReliabilityThree-peak pattern signaling trend reversal from bullish to bearish
Key Points:
- Left shoulder, head (highest), right shoulder
- Neckline acts as support/resistance
- Volume typically decreases
- Break below neckline confirms pattern
Inverse Head and Shoulders
High ReliabilityThree-trough pattern signaling reversal from bearish to bullish
Key Points:
- Opposite of regular H&S
- Forms at market bottoms
- Volume increases on breakout
- Very reliable reversal pattern
Double Top
High ReliabilityTwo peaks at similar levels indicating bearish reversal
Key Points:
- Two peaks at resistance
- Valley between peaks forms neckline
- Volume lower on second peak
- Confirms on neckline break
Double Bottom
High ReliabilityTwo troughs at similar levels indicating bullish reversal
Key Points:
- Two troughs at support
- Peak between forms resistance
- Volume increases on breakout
- W-shaped formation
Triple Top
Very High ReliabilityThree peaks at similar resistance level
Key Points:
- Three failed attempts at resistance
- Stronger than double top
- Decreasing volume on each peak
- Major reversal signal
Triple Bottom
Very High ReliabilityThree troughs at similar support level
Key Points:
- Three successful tests of support
- Increasing buying pressure
- Volume increases on breakout
- Strong bullish reversal
Rounding Top
Medium ReliabilityGradual curved reversal from uptrend to downtrend
Key Points:
- Slow, gradual reversal
- Volume follows price curve
- Also called saucer top
- Takes time to develop
Rounding Bottom
Medium ReliabilityGradual curved reversal from downtrend to uptrend
Key Points:
- Accumulation pattern
- U-shaped formation
- Volume increases gradually
- Strong once confirmed
Continuation Patterns
Bull Flag
High ReliabilityBrief consolidation in strong uptrend before continuation
Key Points:
- Sharp rally (flagpole)
- Parallel channel consolidation
- Slight downward slope
- Volume spike on breakout
Bear Flag
High ReliabilityBrief consolidation in downtrend before continuation
Key Points:
- Sharp decline (flagpole)
- Parallel channel consolidation
- Slight upward slope
- Continuation pattern
Bull Pennant
High ReliabilityTriangle consolidation after sharp upward move
Key Points:
- Similar to flag but triangular
- Converging trendlines
- Decreasing volume in pennant
- Explosion on breakout
Bear Pennant
High ReliabilityTriangle consolidation after sharp downward move
Key Points:
- Triangular consolidation
- Brief pause in downtrend
- Low volume in pattern
- Continuation lower likely
Ascending Triangle
High ReliabilityFlat top resistance with rising support line
Key Points:
- Horizontal resistance
- Rising support line
- Bullish continuation
- Volume increases on breakout
Descending Triangle
High ReliabilityFlat bottom support with declining resistance
Key Points:
- Horizontal support
- Declining resistance line
- Bearish continuation
- Support eventually breaks
Rectangle
Medium ReliabilitySideways price action between support and resistance
Key Points:
- Horizontal channel
- Equal highs and lows
- Can break either direction
- Volume on breakout key
Cup and Handle
High ReliabilityU-shaped accumulation followed by small consolidation
Key Points:
- U-shaped cup formation
- Handle forms near highs
- Handle shouldn't exceed 1/3 of cup
- Bullish continuation pattern
Bilateral Patterns
Symmetrical Triangle
Medium ReliabilityConverging trendlines with no clear bias
Key Points:
- Neither bullish nor bearish
- Decreasing volatility
- Breakout determines direction
- Volume confirms breakout
Wedge (Rising)
High ReliabilityConverging lines both sloping upward
Key Points:
- Both lines rising
- Usually bearish reversal
- Decreasing volume
- Sharp reversal common
Wedge (Falling)
High ReliabilityConverging lines both sloping downward
Key Points:
- Both lines falling
- Usually bullish reversal
- Compression of price
- Explosive breakouts
Diamond
Medium ReliabilityExpanding then contracting price action
Key Points:
- Rare pattern
- Broadening then narrowing
- Often at major tops
- Complex to trade
Chart Pattern Trading Tips
Entry Rules
- • Wait for pattern completion and confirmation
- • Enter on breakout with volume confirmation
- • Use limit orders near breakout levels
- • Consider retests of breakout levels
Risk Management
- • Place stops below pattern lows (bullish)
- • Place stops above pattern highs (bearish)
- • Use measured moves for targets
- • Take partial profits at key levels