Chart patterns cheat sheet

A chart pattern is a recognizable formation on a price chart, built over many candles. It shows how the balance between buyers and sellers changed: where buying stopped, where selling dried up, which level both sides are watching.

Patterns fall into two groups. Reversal patterns form at the end of a trend and suggest a turn. Continuation patterns form inside a trend and suggest that it resumes after a pause.

Patterns are drawn by hand. On Charts the trend line, channel and rectangle tools cover every shape on this page, and Replay lets you test each one on past data.

A reversal pattern needs a trend to reverse. Wedges are listed here, but they also appear as continuation patterns: a falling wedge inside an uptrend, a rising wedge inside a downtrend.

• Head and shoulders – three peaks with the highest in the middle, after an uptrend. Bearish on a close below the neckline.
• Inverse head and shoulders – three lows with the deepest in the middle, after a downtrend. Bullish on a close above the neckline.
• Double top – two peaks at about the same level. Bearish on a close below the low between them.
• Double bottom – two lows at about the same level. Bullish on a close above the high between them.
• Rising wedge – higher highs and higher lows between two converging lines. Bearish on a break of the lower line.
• Falling wedge – lower highs and lower lows between two converging lines. Bullish on a break of the upper line.

• Bull flag – a steep rise, then a short channel that slopes down. Bullish on a close above the channel.
• Bear flag – a steep fall, then a short channel that slopes up. Bearish on a close below the channel.
• Ascending triangle – a flat top and rising lows. Bullish on a close above the top.
• Descending triangle – a flat bottom and falling highs. Bearish on a close below the bottom.
• Cup and handle – a rounded base and a small pullback under the same high. Bullish on a close above the handle.
• Pennant – a steep move, then a small triangle with converging lines. It breaks in the direction of the move before it.
• Symmetrical triangle – lower highs and higher lows. It has no built-in direction and is traded on the break, more often with the prior trend.
• Rectangle – a range between flat support and resistance. It is traded on the break of either side.

The steps are the same for almost every pattern:

• Confirmation – a candle closes beyond the key line: a neckline, a trend line or the edge of a range. Before that the pattern is only a possibility.
• Entry – on the confirming close, or on a retest of the broken line.
• Stop – on the other side of the pattern: beyond the right shoulder, the last low of a flag or the far edge of a triangle.
• Target – the measured move: the height of the pattern projected from the breakout point. For flags and pennants it is the length of the pole.
• Volume – rising volume on the break supports the move. It matters most for upside breakouts.

The shapes are read the same way in every market. The details below differ:

• Timeframe – the classic descriptions were written for daily and weekly stock charts, where a pattern takes weeks or months to form.
• Gaps – a stock can open far beyond a neckline after earnings or news. The entry is then far from the planned stop, and the risk has to be recalculated.
• Volume – exchange volume for stocks is reliable. Crypto volume differs from exchange to exchange, and spot forex has no single source of it.
• Trading hours – stocks stop overnight and at weekends; crypto trades without a break, so patterns there form faster and have no gaps.

• Trading before confirmation – a pattern that has not broken its key line is not complete.
• Forcing a pattern onto noise – if the shape has to be argued for, it is not there.
• Ignoring the trend – a continuation pattern against the higher-timeframe trend has less behind it.
• Treating the measured target as certain – it is an estimate of size, not a level price has to reach.
• Holding a failed pattern – a close back inside the pattern and through its other side cancels the idea.
• Choosing position size by the target instead of by the distance to the stop.