7.24What are chart patterns?
1What is it?
Chart patterns are recognisable shapes in price charts that may hint at continuation (trend continues) or reversal (trend changes).
2Why does it exist?
They summarise the balance between buyers and sellers over weeks.
3Diagram
Chart patterns
Reversal
- • Double top
- • Double bottom
- • Head & shoulders
Continuation
- • Triangles
- • Flags
- • Rectangles
4Quick revision
- Reversal vs continuation.
- Confirmed by a breakout or breakdown.
- Fail often.
5Knowledge check
Q1. Two types of chart patterns?Show answer
Reversal and continuation.
Q2. Is a pattern confirmed before breakout?Show answer
No, confirmation comes with the breakout or breakdown.
Q3. Name a reversal pattern.Show answer
Double top, double bottom, head and shoulders.