There are hundreds of named chart patterns. Most of them are noise. These five show up repeatedly in markets that trend, consolidate, and reverse — and each has a logical structure that explains why it works.
1. Bull and bear flags
A flag is a consolidation after a sharp move. Price surges (the pole), then drifts sideways or slightly against the trend in a tight channel (the flag). The logic: the initial move showed strong momentum. The consolidation is a pause, not a reversal — weak hands exit, strong hands hold.
Entry: breakout from the flag channel in the direction of the pole. Stop: below the flag's low (for bull flags). Target: measured move equal to the pole length.
2. Symmetrical and ascending triangles
Triangles form when buyers and sellers compress price into a tighter range. An ascending triangle has a flat top and rising lows — buyers are getting more aggressive. A symmetrical triangle has equal compression from both sides.
The breakout direction is the signal. Volume should expand on the breakout. Entry: breakout of the triangle boundary. Stop: inside the triangle.
3. Double bottom
A double bottom marks an area where price found support twice at the same level. Two attempts by sellers to push lower, both failing. When price breaks above the neckline (the peak between the two bottoms), the pattern confirms.
Entry: neckline break on volume. Stop: below the second bottom. Target: distance from neckline to bottom, projected up from neckline.
4. Head and shoulders
The classic reversal pattern. Three peaks: a higher peak (head) flanked by two lower peaks (shoulders). The neckline connects the troughs. When price breaks below the neckline, the uptrend is likely over. Inverse head and shoulders is the bullish version.
Entry: neckline break. Stop: above the right shoulder. Target: head height projected from neckline break.
5. Rising and falling wedges
Wedges look like triangles but both boundaries slope in the same direction. A rising wedge is bearish — price is making higher highs and higher lows, but converging. Buyers are losing strength with every push. Falling wedges are bullish.
Entry: break of the lower boundary (rising wedge) or upper boundary (falling wedge). Stop: inside the wedge. Target: wedge height at its widest point.