Financial Analyst/ Guest author, RADEX MARKETS
Lee W. is a seasoned professional trader with over 10 years of experience. Passionate about sharing valuable expertise and unique market insights, Lee W. now serves as an external and independent market analyst for RADEX MARKETS.
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A chart pattern is a recognisable shape on a price chart that gives traders clues about what might happen next, based on the market’s past behaviour. Think of it like a “fingerprint” left behind by buyers and sellers doing battle.
For traders in the Forex, CFD, Cryptocurrency, and precious metals markets, chart patterns are an essential part of technical analysis. These shapes help traders:
Even better, these patterns appear across all timeframes, whether you're scalping EUR/USD on a 5-minute chart or swing trading gold over a few weeks.
Real-world example: In 2022, EUR/USD formed a clear descending triangle on the daily chart. Traders used this bearish continuation pattern to anticipate a breakout lower as the Euro weakened amid rising U.S. interest rates.
In this guide, you’ll learn:
At their core, chart patterns are visual representations of market psychology. They reflect the struggle between buyers and sellers, and hint at who’s likely to win.
Three Main Types of Chart Patterns:
These patterns are formed across all timeframes and assets, making them highly versatile.
Type |
Chart Patterns |
Market Phase |
Typical Direction |
Strategy |
|---|---|---|---|---|
| Reversal | Head & Shoulders, Double Top/Bottom | Trend End | Opposite | Breakout |
| Continuation | Flags, Pennants, Triangles | Trend Ongoing | Same Direction | Trend Following |
| Bilateral | Symmetrical Triangle, Broadening, Diamond | Consolidation | Either | Wait & Confirm |
Let’s look at the patterns that matter. These are the ones that experienced traders look for when reading the charts:
Each pattern has its unique structure, psychology, and trading strategy. There’s no single “best” pattern, some are great in bullish markets; others shine during bearish moves.
Read more: What Is Technical Analysis and How to Use It in Forex Trading.
OK, so let’s have a detailed look at each of these candle patterns.
The Head and Shoulders pattern is one of the most well-known and reliable reversal patterns in technical analysis. It typically forms at the end of an uptrend, signalling that buying pressure is fading and that sellers may soon take control.
Price charts visually map the historical battle between buyers and sellers. Each candlestick or bar tells a story: who was in control, where momentum was building, and when sentiment began to shift.
When a Head and Shoulders forms, the chart is literally showing a weakening bullish trend:
This sequence shows exhaustion, and the break below the neckline confirms that sellers have taken over.
The Inverse Head and Shoulders is a powerful bullish reversal pattern. It’s the mirror image of the classic Head and Shoulders, but instead of signalling weakness at the top of a trend, it signals strength emerging at the bottom of one.
This pattern typically forms after a prolonged downtrend and tells us the bears are running out of steam, while the bulls are quietly preparing to fight back.
Charts are a visual record of market behaviour. Every candle reflects the emotional tug-of-war between buyers and sellers. When you spot an Inverse Head and Shoulders on a chart, you’re literally watching the transition from fear and capitulation to cautious optimism.
The pattern consists of:
Once the price breaks above the neckline, it typically signals a shift in market sentiment, and often, the beginning of a new uptrend.
Bear Markets (Downtrends):This pattern most commonly appears at the bottom of a downtrend, and it signals a potential bullish reversal.
Bull Markets (Uptrends):It’s rarely seen during strong bullish moves. Instead, it’s a foundation pattern, the potential launchpad for the next bull run.
The Double Bottom is a bullish reversal pattern that forms after a prolonged downtrend. It looks like the letter “W” and suggests the market has tested a support level twice and failed to break lower, a sign that buyers are gaining strength.
Charts reflect the ongoing price battles between bulls and bears. In a Double Bottom, the market hits a low, rebounds, then retests that low again, but can't break it. This indicates strong support and potential for a reversal.
Market Context
Bear Markets: Most common at the bottom of a bearish trend, signalling a possible bullish reversal. Bull Markets: Rare, this is a bottoming formation.
The Rising Wedge is a bearish chart pattern that can appear in both uptrends and downtrends. It shows price making higher highs and higher lows within converging trendlines, but with weakening momentum.
Charts show the speed and strength of price movement. In a Rising Wedge, price moves upward, but the range tightens, volume often fades, and pressure builds. Eventually, a sharp bearish breakout often follows.
Market Context
Bull Markets: Frequently appears near market tops, signalling a reversal downward. Bear Markets: Can appear as a continuation pattern during corrective rallies.
The Falling Wedge is a bullish reversal pattern. It shows price making lower highs and lower lows within narrowing trendlines, often during a downtrend.
Charts help visualize momentum compression. A Falling Wedge reveals that sellers are losing control and buyers may be preparing for a breakout.
Market Context
Bear Markets: Common during downtrends, signals bullish reversal potential. Bull Markets: Occasionally forms as a continuation pattern.
A Bull Flag is a bullish continuation pattern. After a strong upward move, price consolidates in a small downward-sloping channel or rectangle, then breaks out to resume the uptrend.
Charts show impulsive moves followed by rest phases. The Bull Flag is that rest, a pause before the next leg higher.
Market Context
Bull Markets: Extremely common. It’s a textbook trend continuation pattern. Bear Markets: Rare and unreliable in bearish conditions.
A Bear Flag is the bearish cousin to the Bull Flag. It forms after a sharp drop, followed by a brief consolidation or upward pullback, then breaks down again.
Charts reveal consolidation phases. In a Bear Flag, price is pausing within a tight, rising structure before continuing lower.
Market Context
Bear Markets: Often signals trend continuation to the downside. Bull Markets: Rare and unreliable in bullish environments.
A Pennant is a short-term continuation pattern formed after a sharp move. It looks like a small symmetrical triangle and typically leads to a breakout in the direction of the prior trend.
Pennants display momentum pauses. After a burst of volume and volatility, price compresses, then resumes its prior path.
Market Context
Bull or Bear Markets: Appears in both. Follow the direction of the pole.
An Ascending Triangle is a bullish continuation pattern. Price forms rising lows but hits resistance at the same level repeatedly. Eventually, bulls overpower and break out.
The chart shows increasing demand (higher lows) pressing against a wall of supply (horizontal resistance).
Market Context
Bull Markets: Very common and reliable. Bear Markets: Rare and risky.
The Descending Triangle is a bearish continuation pattern. Price makes lower highs but holds support at a horizontal level, until eventually breaking downward.
What Do Charts Represent?
Charts show selling pressure building. The descending triangle reflects aggressive sellers overwhelming hesitant buyers.
Market Context
Bear Markets: Signals continued downside pressure. Bull Markets: Rare and usually unreliable.
The Cup and Handle is a bullish continuation pattern. The "cup" forms as price rounds out a bottom, followed by a small consolidation, the "handle", before breaking out.
What Do Charts Represent?
Charts show rounded consolidation, a transition from bearish to bullish sentiment.
Market Context
Bull Markets: A strong continuation setup. Bear Markets: Rare and not trustworthy.
A Symmetrical Triangle is a bilateral pattern that forms during a period of consolidation. Price compresses between converging trendlines, and breaks can happen in either direction.
Charts show indecision. Buyers and sellers are both active, but neither dominates.
Market Context
Any Market: Works in both bullish and bearish environments. Wait for breakout confirmation.
The Rectangle, or range, is a consolidation pattern where price bounces between horizontal support and resistance levels.
Charts highlight balance, equal power between bulls and bears.
Market Context
Any Market: Pattern works both ways, breakout direction is key.
The Broadening Formation shows price making higher highs and lower lows, often in a volatile, unpredictable structure.
They reveal increasing volatility, a tug-of-war spiralling outward.
Market Context
Can appear in both bull and bear markets. Not a beginner-friendly pattern.
Diamond Patterns are rare but powerful reversal patterns. A Diamond Top signals a bearish reversal; a Diamond Bottom suggests bullish reversal.
Charts reveal a shift from consolidation to breakout. Diamond patterns show market indecision followed by explosive resolution.
Market Context
Diamond Top: Bearish, usually at bull market peaks.Diamond Bottom: Bullish, appears after strong downtrends.
With so many chart patterns out there, it’s easy to get overwhelmed. But once you understand the type, context, and signal, spotting them on a chart becomes second nature.
Here’s a quick summary of the key patterns covered:
Pattern Name |
Type |
Appears After |
Signals |
|---|---|---|---|
| Head and Shoulders | Reversal | Bullish trend | Bearish reversal |
| Inverse Head and Shoulders | Reversal | Bearish trend | Bullish reversal |
| Double Top | Reversal | Bullish trend | Bearish reversal |
| Double Bottom | Reversal | Bearish trend | Bullish reversal |
| Rising Wedge | Reversal | Bullish trend | Bearish reversal or continuation |
| Falling Wedge | Reversal | Bearish trend | Bullish reversal or continuation |
| Bull Flag | Continuation | Sharp bullish move | Trend continuation (bullish) |
| Bear Flag | Continuation | Sharp bearish move | Trend continuation (bearish) |
| Pennant | Continuation | Strong price move | Continuation (direction of move) |
| Ascending Triangle | Continuation | Bullish trend | Bullish breakout |
| Descending Triangle | Continuation | Bearish trend | Bearish breakout |
| Cup and Handle | Continuation | Bullish consolidation | Bullish breakout |
| Symmetrical Triangle | Bilateral | Consolidation phase | Breakout either direction |
| Rectangle (Range) | Bilateral | Sideways movement | Breakout either direction |
| Broadening Formation | Bilateral | Volatile swings | Breakout either direction |
| Diamond Top | Reversal | Bullish trend | Bearish reversal |
| Diamond Bottom | Reversal | Bearish trend | Bullish reversal |
Please Keep in Mind:
- There’s no “best” chart pattern, each one works differently depending on the market, timeframe, and surrounding conditions.
- Some patterns, like flags or triangles, excel in trending markets, while others like double tops or wedges tend to shine at turning points.
- Always wait for confirmation, never trade a pattern just because it “looks like one.”
Read more：What Is Technical Analysis and How to Use It in Forex Trading
Chart patterns aren’t just pretty shapes, they’re powerful technical analysis tools that help traders understand what the market might do next. Think of them as the market’s way of leaving clues, and if you know how to read those clues, you gain a serious edge.
Whether you’re trading forex, crypto, indices, or commodities, chart patterns offer context. And in trading, context is everything.
But It’s Not Trading Magic
Let’s be honest: chart patterns don’t work 100% of the time.They’re probabilistic tools, not guarantees. Which means:
Yes, they can be intimidating at first, all those lines and necklines and triangles.
But with time, practice, and exposure to different markets, you’ll start recognizing them instantly. It’s like learning to read price action fluently.
Tip: Try back testing chart patterns on historical data, it’s one of the best ways to train your eye without risking a penny.
Chart patterns don’t come with neon signs , they form gradually, often right in front of you, while the market’s moving. That’s why it’s essential to know what to look for, where to look, and how to interpret it in context.
Here’s a step-by-step breakdown to help you spot patterns like a pro:
Before you go hunting for patterns, step back and ask: What kind of market am I in?
Pattern Strategy unless it's backed by market context. Don’t trade an ascending triangle in a bearish market unless you're asking for pain.
Once you’ve determined the environment, start looking for:
Look for structure first, not perfection.Patterns are rarely textbook-perfect in live markets, the market doesn’t care about your diagrams.
Once you think you see a pattern:
Quick Pattern Context Table
Market Condition |
Common Patterns |
Appears After |
Typical Signal |
|---|---|---|---|
| Bull Market | Bull Flags, Asc. Triangles, Cup/Handle | Breakout or pullback | Continuation (Bullish) |
| Bear Market | Bear Flags, Desc. Triangles, H&S, Wedges | Bounce or weak rallies | Continuation/Reversal (Bearish) |
| Sideways | Rectangle, Symmetrical Triangle | Extended consolidation | Breakout (Any direction) |
Chart pattern recognition is a skill, not something you learn once and master overnight.It takes:
Think of patterns like accents, once you’ve heard them enough, you’ll spot them anywhere.
So, you’ve spotted a textbook pattern, great spot. Now what do you do?
Identifying a chart pattern is only half the job. Trading it effectively means applying a solid, repeatable process with risk management baked in. Here's how to do it:
Before you jump in, make sure the pattern is actually valid:
Tip:Never trade within the pattern, wait for confirmation (breakout or breakdown).
Every pattern should have a clear invalidation point, a price level that proves your idea wrong.
Typical stop-loss placement:
Your stop should protect you, not sabotage you. Don’t set it too tight, or you’ll get stopped on noise.
Most chart patterns give you a projected target based on their structure.
Here’s how to calculate it:
Examples:
Sketch it on your chart before you place the trade. Visual targets keep you focused.
Execution matters. Whether you’re scalping or swing trading, you need:
Read more: Top forex brokers to trade with in 2025
Once your plan is set:
Discipline is more important than pattern recognition.
Let’s not sugarcoat it: even the most picture-perfect chart pattern can fail.Why? Because patterns don’t control the market, they reflect it.And markets are driven by people, emotions, and the occasional outburst from a central bank talking head.
Here’s what every trader should watch out for:
You see the breakout; you enter the trade… and BOOM, price snaps back and hits your stop.
The more you stare at charts, the more you start seeing patterns… even when they’re not really there.
This is called: “Pattern hallucination.”
It leads to:
Fix: Stick to your playbook. If the structure doesn’t match your rules, skip it, wait for the next set-up.
Just because a chart looks like a rising wedge doesn’t mean the market will care.
Fundamentals, sentiment, or breaking newscan invalidate a pattern instantly.
Fix: Be flexible. If the structure changes mid-trade, adapt or exit. Don’t cling to a pattern that’s already broken.
What is technical analysis and how to use it in forex trading
Many failed trades come from chasing setups with:
Fix: Only trade patterns that offer at least a 1:2 risk-to-reward ratio (preferably 1:3+).
Waiting too long for perfect confirmation can also backfire. You miss the breakout, price runs, and now you’re chasing it.
Fix: Have a trigger plan. Know how you’ll enter:
Chart patterns are tools, not guarantees. And like any tool, they require skill, patience, and a plan.
Read more：Forex risk management: 10 tips to manage 6 key risk types in trading
There’s no single “best” pattern, it depends on your strategy and market. That said, some of the most popular and reliable ones include:
Patterns work best with confirmation and risk management.
There are three main types of chart patterns:
Within these types, there are dozens of individual formations, each with its own structure and context.
Forex markets often produce clear, recurring patterns due to their liquidity and volatility. Some of the most common ones include:
These patterns occur across timeframes, from the 5-minute chart to the weekly.
Yes, but not in isolation. Chart patterns are effective tools when used:
They’re not magic, but they can give you an edge if used with discipline.
Absolutely. Here are a few:
Use them as part of your toolkit, not the whole toolbox.
Right here, and in resources like:
Read more:What Is Technical Analysis and How to Use It in Forex Trading
Read more:The Best Forex Indicators Every Trader Should Use in 2025
Yes, they’re actually one of the best places to start. They help beginners:
Just don’t expect to master them overnight, screen time is the best teacher.
Risk Warning : Trading derivatives and leveraged products carries a high level of risk.
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