Chart Patterns Complete Guide: Trading Triangles, Head & Shoulders, and More (2026)

Introduction to Chart Patterns

Chart patterns are formations created by price movements that indicate potential future direction. They're categorized into continuation patterns (trend continues) and reversal patterns (trend reverses).

Why Use Chart Patterns?

• Visual Clarity: Easy to identify on charts
• Predictive Power: Indicate future price direction
• Entry/Exit Points: Provide specific trading levels
• Works on All Timeframes: From M5 to monthly
• Market Psychology: Reflect trader sentiment

Reversal Patterns

1. Head and Shoulders

Pattern: Three peaks, middle peak (head) is highest.

Signal: Bearish reversal (after uptrend).

How to Trade:

1. Identify pattern formation
2. Wait for neckline break
3. Enter short on break
4. Target: Distance from head to neckline
5. Stop: Above right shoulder

2. Inverse Head and Shoulders

Pattern: Three troughs, middle trough (head) is lowest.

Signal: Bullish reversal (after downtrend).

How to Trade:

1. Identify pattern formation
2. Wait for neckline break
3. Enter long on break
4. Target: Distance from head to neckline
5. Stop: Below right shoulder

3. Double Top

Pattern: Two similar peaks at resistance.

Signal: Bearish reversal.

How to Trade:

1. Identify two peaks
2. Wait for neckline break
3. Enter short on break
4. Target: Distance from peaks to neckline
5. Stop: Above peaks

4. Double Bottom

Pattern: Two similar troughs at support.

Signal: Bullish reversal.

How to Trade:

1. Identify two troughs
2. Wait for neckline break
3. Enter long on break
4. Target: Distance from troughs to neckline
5. Stop: Below troughs

Continuation Patterns

1. Ascending Triangle

Pattern: Horizontal resistance, rising support.

Signal: Bullish continuation.

How to Trade:

1. Identify triangle formation
2. Wait for breakout above resistance
3. Enter long on breakout
4. Target: Triangle height
5. Stop: Below support

2. Descending Triangle

Pattern: Horizontal support, falling resistance.

Signal: Bearish continuation.

How to Trade:

1. Identify triangle formation
2. Wait for breakout below support
3. Enter short on breakout
4. Target: Triangle height
5. Stop: Above resistance

3. Symmetrical Triangle

Pattern: Converging support and resistance.

Signal: Continuation (direction of breakout).

How to Trade:

1. Identify triangle formation
2. Wait for breakout (either direction)
3. Enter in breakout direction
4. Target: Triangle height
5. Stop: Beyond opposite side

4. Flag Pattern

Pattern: Small rectangle after strong move.

Signal: Continuation of previous trend.

How to Trade:

1. Identify flag formation
2. Wait for breakout
3. Enter in trend direction
4. Target: Previous move distance
5. Stop: Beyond flag

5. Pennant Pattern

Pattern: Small triangle after strong move.

Signal: Continuation of previous trend.

How to Trade:

1. Identify pennant formation
2. Wait for breakout
3. Enter in trend direction
4. Target: Previous move distance
5. Stop: Beyond pennant

Best Timeframes for Chart Patterns

Day Trading

• Primary: M15, H1
• Patterns: Smaller patterns, faster completion

Swing Trading

• Primary: H4, D1
• Patterns: Medium patterns, days to complete

Position Trading

• Primary: D1, W1
• Patterns: Large patterns, weeks to complete

Chart Pattern Trading Rules

Entry Rules

1. Pattern Identified: Clear formation visible
2. Confirmation: Pattern complete (all points touched)
3. Breakout: Price breaks pattern boundary
4. Volume: Higher volume on breakout (if available)
5. Enter: On breakout confirmation

Exit Rules

1. Target Reached: Measured move complete
2. Pattern Failure: Price returns into pattern
3. Stop Loss: Pattern invalidated
4. Time Limit: Pattern taking too long

Common Chart Pattern Mistakes

1. Trading Incomplete Patterns: Pattern not fully formed
2. No Confirmation: Entering before breakout
3. Wrong Measurement: Incorrect target calculation
4. Ignoring Context: Not considering trend
5. Too Many Patterns: Over-analyzing charts

Chart Pattern Checklist

Before trading a pattern:

• [ ] Pattern clearly identified and complete
• [ ] All pattern points touched
• [ ] Breakout confirmed (close beyond boundary)
• [ ] Volume confirms (if available)
• [ ] Target calculated (pattern measurement)
• [ ] Stop loss set (beyond pattern)
• [ ] Risk/reward ratio at least 1:2
• [ ] Position size calculated using risk management rules

Advanced Chart Pattern Techniques

Multiple Timeframe Confirmation

• Higher Timeframe: Confirm pattern context
• Lower Timeframe: Fine-tune entry
• Entry Timeframe: Identify pattern

Pattern Combinations

Combine patterns:

• Triangle + Flag: Strong continuation
• Head & Shoulders + Support: Strong reversal
• Multiple Patterns: Confirm each other

When Chart Patterns Work Best

Ideal Conditions

• Clear Formations: Well-defined patterns
• Complete Patterns: All points touched
• Volume Confirmation: Higher volume on breakout
• Trend Context: Patterns aligned with trend

Avoid When

• Incomplete Patterns: Not fully formed
• No Volume: Unclear breakout
• Weak Patterns: Only 2-3 touches
• Major News: Can invalidate patterns

Summary

Chart patterns are powerful tools for technical analysis and predicting price movements. Success requires proper pattern identification, confirmation, and strict risk management.

Key Takeaways:

• Reversal patterns = Trend change
• Continuation patterns = Trend continues
• Always wait for confirmation
• Measure targets correctly
• Use proper stop losses
• Combine with other analysis

Next Steps

• Learn Candlestick Patterns
• Master Price Action Trading
• Understand Support and Resistance
• Compare Best MT5 Brokers