Chart Pattern Recognition
Chart patterns are specific formations on price charts that can help predict future price movements. These patterns represent market psychology and trading behavior that tends to repeat over time.
Common Pattern Types
Reversal Patterns
Bullish Reversals
- • Double Bottom
- • Inverse Head & Shoulders
- • Bullish Engulfing
- • Morning Star
Bearish Reversals
- • Double Top
- • Head & Shoulders
- • Bearish Engulfing
- • Evening Star
Continuation Patterns
Bullish Patterns
- • Ascending Triangle
- • Bull Flag
- • Cup and Handle
- • Rising Wedge
Bearish Patterns
- • Descending Triangle
- • Bear Flag
- • Falling Wedge
- • Rectangle
Why Patterns Matter
Trading Benefits
- •Predict potential price movements
- •Identify entry and exit points
- •Measure potential price targets
- •Manage risk with pattern breakdowns
Pattern Analysis Example
ETH/USD Case Study
Pattern Identified
Ascending Triangle pattern forming with:
- • Resistance at 2,720
- • Rising support trend line
- • Decreasing volume (common in consolidation)
Trading Implications
- • Potential breakout target: 2,800
- • Stop loss below support trend line
- • Watch for volume confirmation on breakout
Pattern Trading Tips
- • Wait for pattern completion before trading
- • Confirm breakouts with volume
- • Use multiple timeframe analysis
- • Consider market context and trend
- • Don't force pattern recognition
Important Notes
- • Patterns are not guaranteed to complete
- • False breakouts are common
- • Combine with other technical analysis tools
- • Pattern reliability varies with timeframe
- • Always use proper risk management