Profitable Chart Patterns 

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Chart patterns are incredibly popular in many different markets because they allow 
you to not only find profitable trades, but also manage them. 

Whilst there are many charting patterns you can use, some of the most popular 
repeat over and over again. They form on all time frames and you can use them in 
many different markets from Forex to stocks. 

In this post we go through exactly what chart patterns are and how you can start 
using them in your own trading. 

What are Chart Patterns? 

Chart patterns are different to candlestick patterns. 

Whilst many traders will be using Japanese candlesticks to find their trading 
patterns, there is a difference between a chart pattern and a candlestick pattern. 

A candlestick pattern is normally a one or two candlestick pattern only. For 

Chart patterns are not formed with just one or two candlesticks and are created 
over longer periods of time. They will normally show you a bigger reversal that is 
being formed or a larger trend that is being shaped. 

Just because they are formed with more sessions and candlesticks does not mean 
that you have to use them for longer forms of trading only. There are many 

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patterns you can use for short term trading and patterns that can also be used to 
make intraday or scalp trades. 

How to Use Chart Patterns 

You can use chart patterns in different ways in your trading, but the most popular is 
to find and then make high probability trade entries. 

Chart patterns repeat time and time again. The reason they continue to form and 
continue to repeat is because each pattern is price showing you what traders are 
doing through the price action. 

Given similar sorts of circumstances traders will tend to behave in the same ways 
over and over again. Think about how traders get greedy when looking to make 
money or fearful when they start losing it. These emotions don't change. 

This is the same reason why the same patterns continue to form over and over 
again. Traders do the same things over and over again in the markets which creates 
the same patterns. 

You can use this knowledge to your advantage by finding and then trading these 
patterns to make profitable trades. 

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Trading Classic Chart Patterns 

There are endless amounts of chart patterns you can learn to use in your own 
trading. Just like the endless amount of​ ​indicators​ you can find and use, you don't 
need to know them all to be profitable. 

Often the best way is to find one or two classic chart patterns and then mastering 
them so you know them back to the front. This is far better than finding and trading 
20 x different patterns, but being very average at them all. 

Head and Shoulders 

The head and shoulders is quite possibly the most popular of all the chart patterns. 

Once you know how to identify it you will start to see it on all your charts and time 
frames and you will see how profitable it can be. When done correctly this pattern 
can be incredibly reliable. 

The head and shoulders pattern is formed with three peaks and a neckline. The 
first peak is shoulder one or the 'left shoulder'. The second peak is the head and 
the third peak is the right shoulder. 

You can read more about​ ​how to find and trade the head and shoulders pattern 
here​. 

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Double Top and Double Bottom 

This is a very easy pattern to identify, but a very reliable reversal pattern. 

This pattern is formed with two peaks and a neckline. For example; with a double 
top we need to see price form two peaks rejecting the same resistance level. 

For a double bottom we need to see price forming two swing lows rejecting the 
same support level. 

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Entry is normally taken when price breaks higher or lower through the neckline. 

You can read more about​ ​how to find and trade the double top and bottom here​. 

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Day Trading Chart Patterns 

Charting patterns are not just for the higher time frames and you can use them for 
both day trading and intraday trading. 

The most commonly used pattern that is used by everyone from the big banks right 
down to the smallest retail trader is​ ​support and resistance​. 

When using support and resistance you are either looking to buy / sell the bounce, 
or buy / sell the breakout. 

When buying or selling the bounce you are looking for the support or resistance 
level to hold and for price to make a reversal. 

When buying or selling the breakout you are looking for a key support or resistance 
area to break. 

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Intraday Chart Patterns 

Another very popular pattern that can be used on all time frames and in many 
different markets is role reversal trading. 

With role reversal trading you are using support and resistance levels, but you are 
looking for these levels to change their roles. 

See the example chart below. At first price finds this level as a support level. Price 
then breaks lower. When price makes a new move back higher you are watching to 

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see if the old support level will hold as a role reversal and new resistance level. If it 
does you can look for short trades. 

You can use these role reversals as old support / new resistance and vice versa, old 
resistance and new support levels. 

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Lastly 

We have only gone through a few of the popular chart patterns in this post. There 
are many you can learn and use in your trading. 

Keep in mind you don't need to know them all and finding one or two that you like 
the best and then mastering them will often be the best way. 

Make sure you test out these patterns and any other new strategies on​ ​free demo / 
virtual trading charts​ first before you ever risk any real money in the live market. 

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