CHARTIST

PATTERNS
QUICK GUIDE

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 Index
What is a chart pattern?
Continuity chart patterns
Flag
Pennant
Continuation triangle
Channel
Mug with handle
Neutral chart patterns
Symmetrical triangle
Rectangle
Reversal Chart Patterns
Double top / Double bottom
Head Shoulders Shoulders
Diamond
Rounded floor
Bullish Wedge / Bearish Wedge
Triple top / Triple bottom
Bump and Run

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What is a chart pattern?
A chart pattern is a CONSOLIDATION of the price in the form of a geometric figure
formed during a TREND. Considering that any price chart has Time on its X axis and
Price on its Y axis, we can say that a chart pattern represents A VERY PARTICULAR
EVOLUTION of the price movement in a given time during which buyers and sellers
compete for control of the market.

There are CONTINUITY patterns and REVERSION patterns which allow us to recognize
the next price movement with a high degree of probability. For example, continuation
patterns indicate that the trend is more likely to continue, while reversal patterns show that
the trend has exhausted itself and is therefore more likely to reverse.

It is very important to be able to recognize these patterns in the middle of a price chart,
but you must be aware that this information constitutes a minor part of your profitability,
since it is the way in which you operate them that will actually make you consistent or not:
never forget that trading is a fundamentally psychological activity.

Below we present a series of examples corresponding to the most important chart

patterns (you don't need more to be profitable) and we invite you to perform your own
backtesting of each of them, create your own scenarios and choose those you prefer to
operate with.

Remember that if you want to know more about what we are talking about, you can
contact us and we will gladly guide you in your development as a trader: Visit our website,
read our blog, follow us on our social networks and sign up for our course!

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Continuity chart patterns
A continuity chart pattern is a consolidation that occurs
IN THE MIDDLE of a trend and where the price is more
likely to break IN FAVOR of the trend. These patterns
mark a temporary pause in an uninterrupted trend.

Among the main chartist patterns of continuity we have:

1 Flag.
2 Pennant.
3 Triangle.
4 Channel.
5 Mug with handle.

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1. Flag
The flag is characterized by having the shape of a
channel that develops in the opposite direction to the
trend. This pattern represents a pause in the trend and
is normal for it to appear after a strong price push.

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2. Pennant
The pennant is a small consolidation that usually
appears after a strong price impulse, at which point it
takes a short break before resuming and continuing its
direction. It is formed by a series of decreasing highs
and a series of increasing lows.

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3. Continuation triangle
Triangles are patterns that are formed as a result of long bullish
and bearish price fluctuations, which progressively decrease and
converge at a single point. In the case of CONTINUATION
triangles, these can be bullish or bearish and it is observed that
the confluence point is located on the support/resistance that the
price is trying to break during that particular moment of the trend.

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4. Channel
As the name suggests, this pattern is channel-shaped.
However, for it to be considered a continuation pattern,
the channel must develop in the same direction as the
trend.

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5. Mug with handle
The cup with handle figure is an ascending continuation
pattern formed by two rounded valleys, where the first
one (the cup) is much deeper and wider than the
second one (the handle). In this way, the edges of the
cup and the handle are aligned on the same horizontal
straight line (always a resistance) which would be the
neck line of the cup with handle figure.

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Neutral chart patterns
A neutral chart pattern is a price consolidation that has
an equal probability of breaking out both upwards and
downwards. Among the main neutral chart patterns we
have:

1 Symmetrical triangle.
2 Rectangle.

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1. Symmetrical triangle
The symmetrical triangle is a long consolidation that
presents equal bullish and bearish oscillations, showing
a perfect balance between buyers and sellers. This
pattern has equal probability of breaking out to the
upside or to the downside.

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2. Rectangle
A rectangle forms a lateral movement in which there
are several successive highs and lows bounded
between a horizontal support and resistance.

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Reversal Chart Patterns
A reversal chart pattern is a consolidation that heralds a
change in the price trend.

Among the main reversal chart patterns we have:

1 Double top / Double bottom.
2 Head and Shoulders Man.
3 Diamond.
4 Rounded floor.
5 Bullish wedge / Bearish wedge.
6 Triple top / Triple bottom.
7 Bump and Run.

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1. Double top / Double
bottom
The double top (or double bottom) pattern is characterized by
having two consecutive highs (or two lows) at the same price
level.

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2. Head Shoulders
Shoulders
The HCH is one of the most important patterns in chart
analysis due to its effectiveness. It gets its name from the
formation of three relative highs aligned on the same price
level (the collarbone): the first and last have a lower level,
while the central high has a larger size, thus forming
something similar to two shoulders and a head.

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3. Diamond
This is a trend reversal pattern that is formed by two
symmetrical triangles juxtaposed in a diamond shape.

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4. Rounded floor
This pattern appears at the end of a downtrend and features
a flat and extended 'U' shape.

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5. Bullish Wedge / Bearish
Wedge
The wedge is a chart pattern consisting of two converging
trend lines in a wedge shape.

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6. Triple top / Triple bottom
The triple top (or triple bottom) pattern is characterized by
having three consecutive highs (or three lows) at the same
price level.

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7. Bump and Run
This reversal pattern is formed when, during a prolonged
uptrend, a rapid and large price increase is experienced as a
result of excessive speculation in the market, generating the
liquidity necessary for the price to reverse.

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