Chart patterns fall into three groups. Reversal patterns (head and shoulders, double top, double bottom) suggest a trend may end. Continuation patterns (flags, pennants, triangles, rectangles) suggest a pause before the trend resumes. Breakout patterns (cup and handle, wedges, ranges) mark a move out of consolidation. For all of them, the stop goes beyond the pattern and the target is usually the pattern's height projected from the break.
This is a quick reference for the twelve chart patterns traders use most. For each one you get what it looks like, what it suggests, and where the entry, stop and target usually go. At the end is the part cheat sheets skip: how well these patterns actually work.
How to use any pattern
- Identify the trend before the pattern. A reversal pattern needs something to reverse. A continuation pattern needs a trend to continue.
- Wait for the break. A pattern is not a signal until price closes beyond its boundary.
- Entry on the break or the retest of the broken line.
- Stop on the other side of the pattern. If price returns inside it, the pattern has failed.
- Target by measuring the pattern's height and projecting it from the break point.
- Size from the stop distance. See position sizing.
Reversal patterns
| Pattern | Shape | Suggests | Trigger |
|---|---|---|---|
| Head and shoulders | Three peaks, the middle one highest | Uptrend ending | Close below the neckline |
| Inverse head and shoulders | Three troughs, the middle one lowest | Downtrend ending | Close above the neckline |
| Double top | Two peaks at about the same level | Uptrend ending | Close below the valley between them |
| Double bottom | Two troughs at about the same level | Downtrend ending | Close above the peak between them |
Reversal patterns need an existing trend and usually take weeks to form. Many "double tops" turn out to be pauses before another leg up, which is why the neckline break matters.
Score the Setup Before You Take It
TRADZY's Void Engine rates any setup 0–100 across 12+ variables: structure, trend alignment, volume, momentum and key levels.
Score a Setup Free →Continuation patterns
| Pattern | Shape | Suggests | Trigger |
|---|---|---|---|
| Bull flag | Sharp rise, then a small downward-sloping channel | Uptrend resumes | Break above the flag |
| Bear flag | Sharp fall, then a small upward-sloping channel | Downtrend resumes | Break below the flag |
| Pennant | Sharp move, then a small symmetrical triangle | Trend resumes | Break in the trend direction |
| Ascending triangle | Flat top, rising lows | Usually a break up | Close above the flat top |
| Descending triangle | Flat bottom, falling highs | Usually a break down | Close below the flat bottom |
Flags and pennants are short, normally a few days to a few weeks. If a "flag" drags on much longer, it is more likely a range.
Breakout patterns
| Pattern | Shape | Suggests | Trigger |
|---|---|---|---|
| Cup and handle | Rounded bottom, then a small pullback | Uptrend continues | Close above the handle's high |
| Rising or falling wedge | Converging lines both sloping the same way | Often a reversal against the slope | Break of the lower (rising) or upper (falling) line |
| Rectangle (range) | Price bounces between flat support and resistance | Break in either direction | Close outside the range |
A worked example
A stock rises from $40 to $50, consolidates in a flag between $50 and $47.50, then closes at $50.50 on higher volume. Entry $50.50. Stop $47.30, under the flag low. Risk $3.20 per share. The pole was $10 tall, so the measured target is $60.50, but a cautious trader might take profit at $57, a 1:2 ratio. Risking $60 buys about 18 shares.
How reliable are chart patterns?
Honestly, less than the textbooks suggest.
- They are subjective. Two traders draw the same pattern differently.
- Many fail. Breakouts reverse back into the pattern often enough that stops are essential.
- Studies are mixed. Researchers find weak or inconsistent edges after costs, and Tradzy's own tests of pattern-based reads on historical charts landed near a coin flip on direction.
- Where they do help: they give a precise place for a stop and a clear measure of risk and reward, which makes trades easier to size and review.
Use patterns as a framework for defining risk, not as a prediction. Test them on past data first and keep a record of your own results. See what is backtesting and how to journal your trades.
Related reading: support and resistance, bullish candlestick patterns and bearish candlestick patterns.
FAQ
What are the most common chart patterns?
Head and shoulders, double top and bottom, triangles, flags, pennants, wedges and cup and handle.
What is the most reliable chart pattern?
No pattern is reliably profitable alone. Patterns that form at clear support or resistance on higher timeframes and break out on strong volume tend to work better than ones in open space.
How do you set a target for a chart pattern?
Measure the pattern's height at its widest point and project it from the break. Many traders take profit earlier, at the nearest opposing level.
How long does a chart pattern take to form?
Flags and pennants take days to a few weeks. Head and shoulders, double tops and cup and handles often take weeks to months.
Should beginners trade chart patterns?
You can learn them, but practise on a demo account first and risk a small fixed amount per trade. See paper trading.
Put This Into Practice
- Score your next setup 0–100 with the Void Engine before entering
- Log the trade and tag the setup in the TradLog
- Review weekly: keep what pays, cut what doesn't
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Educational content, not financial advice. Trading involves substantial risk of loss.