A chart pattern is a shape that price traces as buyers and sellers fight over a level. Traders watch them because the same shapes keep turning up, and because so many people watch them that a break of the pattern often brings a wave of orders. None of them is a guarantee. Treat a pattern as a plan (where to enter, where you’re wrong, where to take profit), not as a prediction.
Reversal patterns
These form when a trend runs out of steam. They are only meaningful after a clear move in the opposite direction; a “double top” in a sideways market is just a range.
Head and shoulders Bearish
Three peaks after an uptrend, with the middle one (the head) highest and the two shoulders roughly level. The line through the two lows between them is the neckline. It shows buyers failing to make a new high after one last push.
Trading it. The pattern is complete when price closes below the neckline. A common target is the height from the head to the neckline, measured down from the break. Many traders wait for a retest of the neckline from below before selling.
On FreeCharting. Draw the neckline with the Trend line tool (Alt+T), or mark all five turning points with the XABCD tool.
Inverse head and shoulders Bullish
The mirror image at the end of a downtrend: three troughs, the middle one lowest. A break above the neckline suggests sellers are exhausted.
Trading it. Buy on a close above the neckline or on the retest; the head-to-neckline height gives a first target. Volume that rises on the breakout makes it more convincing.
On FreeCharting. Use the Trend line tool for the neckline and a Long position tool to plan the entry, stop and target.
Double top Bearish
Two peaks at about the same price with a dip between them, shaped like an M. The second attempt fails where the first one did.
Trading it. Confirmation is a close below the low between the peaks. The distance from the peaks to that low, projected down, is the usual target. If the second peak breaks clearly higher, the pattern has failed.
On FreeCharting. Mark the two highs with a Horizontal ray and the confirmation level with a Horizontal line.
Double bottom Bullish
Two lows at about the same price, shaped like a W. Sellers push down twice and fail to make a lower low.
Trading it. Buy on a close above the high between the two lows. A stop goes below the lows; the pattern height gives a target.
On FreeCharting. A Horizontal line across the lows and another at the middle high make the setup easy to read.
Triple top Bearish
Three failed attempts at the same resistance. Rarer than a double top, and often more reliable because the level has been tested so many times.
Trading it. Treat it like a double top: wait for a close below the support line under the peaks.
On FreeCharting. Draw the resistance and support with the Horizontal line tool, or set a price alert on the support line.
Triple bottom Bullish
Three lows at the same support before price breaks higher.
Trading it. Buy the break above the resistance between the lows, with a stop under the support.
On FreeCharting. Right-click the resistance line and choose Add alert to be told when it breaks.
Rounding bottom (saucer) Bullish
A slow, curved turn from falling to rising prices, often over weeks or months. It shows selling pressure fading gradually rather than a sudden reversal.
Trading it. Traders look for a break above the level where the decline started, often on rising volume.
On FreeCharting. Use the Brush tool to sketch the curve, or hold still on the chart and sketch it with Draw by holding.
Continuation patterns
Pauses within a trend. Price catches its breath in a small range before, more often than not, carrying on in the same direction.
Bull flag Bullish
A sharp rise (the pole) followed by a short, gently falling channel (the flag). The pullback is shallow because buyers are still in control.
Trading it. Buy on a break above the top of the flag. A popular target adds the height of the pole to the breakout point. A flag that drifts down more than about half the pole is suspect.
On FreeCharting. Draw the flag with the Parallel channel tool (Alt+C) and measure the pole with Measure (Alt+M).
Bear flag Bearish
A sharp drop followed by a short, rising channel, before the decline resumes.
Trading it. Sell on a break below the flag, with a stop above its top; the pole height gives a target.
On FreeCharting. The Parallel channel tool fits the flag; a Short position tool plans the trade.
Pennant Bullish
Like a flag, but the pause is a small symmetrical triangle rather than a channel. It usually lasts only a few bars to a few weeks.
Trading it. Trade the breakout in the direction of the pole. Pennants can form in downtrends too, pointing the other way.
On FreeCharting. Two Trend lines converging after the pole outline it.
Ascending triangle Bullish
A flat top with rising lows. Sellers defend one price, but buyers step in higher each time, until the resistance gives way.
Trading it. Buy the close above the flat top. The height of the triangle at its widest point is the usual target.
On FreeCharting. A Horizontal ray for the top and a Trend line along the lows.
Descending triangle Bearish
A flat bottom with falling highs: buyers defend a price while sellers get more aggressive.
Trading it. Sell a close below the flat support; the widest part of the triangle projects the target.
On FreeCharting. Mark the support with a Horizontal line and set an alert on it.
Symmetrical triangle Either way
Lower highs and higher lows squeezing into a point. Neither side is winning yet; the breakout direction decides it.
Trading it. Wait for a close outside either line. Breakouts usually happen two-thirds to three-quarters of the way to the apex; a triangle that drifts into its point often fizzles.
On FreeCharting. Two Trend lines, or the Triangle shape tool.
Rising wedge Bearish
Price rises inside two upward-sloping lines that converge. Each push higher gains less ground, a sign the buying is tiring.
Trading it. The signal is a break below the lower line. It can appear as a reversal at the top of an uptrend or as a continuation within a downtrend.
On FreeCharting. Draw both lines with the Trend line tool.
Falling wedge Bullish
Price falls inside two converging, downward-sloping lines, with each drop smaller than the last.
Trading it. Buy the break above the upper line; the widest part of the wedge gives a rough target.
On FreeCharting. Two Trend lines, plus a Long position tool for the trade plan.
Cup and handle Bullish
A rounded dip back to the old high (the cup), then a small, shallow pullback (the handle) before the breakout. Popularised in stock trading, it shows supply being soaked up.
Trading it. Buy on a break above the rim. The depth of the cup, added to the rim, is the classic target. A handle that falls into the lower half of the cup weakens the pattern.
On FreeCharting. A Horizontal line across the rim, and the Brush tool or Draw by holding for the cup.
Rectangle (range) Either way
Price bounces between flat support and resistance. Ranges often continue the prior trend, but can break either way.
Trading it. Some traders buy near support and sell near resistance while the range lasts; others wait for a close outside it and target the range height.
On FreeCharting. The Rectangle tool (Alt+R) boxes the range; add alerts at both edges.
How reliable are chart patterns?
Less than the textbook pictures suggest. Many patterns fail, and it’s easy to see shapes that aren’t really there. A few habits help:
- Wait for the close. A wick through a neckline that closes back inside isn’t a breakout.
- Look for volume. Breakouts on rising volume hold more often than quiet ones. Add Volume to the chart.
- Know where you’re wrong. Put the stop where the pattern would be invalid, such as above the right shoulder of a head and shoulders, and size the trade from that distance. The Long/Short position tool does the arithmetic.
- Check the bigger picture. A bull flag on the 15-minute chart means less if the daily chart is in a downtrend. Put two timeframes side by side with a multi-chart layout.
Practise spotting them
Open a chart, press Bar replay and pick a point in the past. The future is hidden, so you can mark a pattern, place a practice trade in the replay bar, and step forward bar by bar to see how it played out, without risking anything.
Frequently asked questions
What is the most reliable chart pattern?
No pattern works every time. Head and shoulders, double tops and bottoms, and flags are the most studied, and they tend to work best after a clear trend, with a decisive close through the key level and rising volume.
Do chart patterns work for crypto and forex?
Yes. Patterns come from how people trade, not from the asset, so they appear in stocks, forex and crypto on every timeframe. Short timeframes produce more patterns, and more false ones.
How do I measure a pattern’s target?
Most targets project the pattern’s height from the breakout point: head to neckline for a head and shoulders, the pole for a flag, the widest part for a triangle. The Measure tool (Alt+M) shows the distance in price and percent.
Can FreeCharting find chart patterns for me?
The Candlestick Patterns indicator marks candle patterns automatically, and the Price Action indicator marks market structure, order blocks and fair value gaps. Larger chart patterns you draw yourself, which is quick with the drawing tools or by sketching with Draw by holding.