On a price chart, you will notice many recurring and repeated price patterns that not only form curious shapes, but also provide predictive value which way price is going to move once the pattern is completed.
Thus, learning how to identify and trade these patterns can be very lucrative.
What are price chart patterns, how do they form, and how can we identify them?
There are 2 main types of chart patterns, each with different patterns that fall under each type.
Continuation patterns are a pause in the trend. and they are useful for trend-followers and breakout traders who want to wait for a good opportunity to get onto the exiting trend, and ride on the momentum.
Reversal patterns usually lead to a change in direction of the trend, and they are useful for contrarian traders who want to get in early on a new trend, or trend traders who want to know when the current trend will come to an end, so that they can be ready to change direction.
When it comes to actual trading, there are many other factors to consider besides the price patterns, which can affect the probability of success of your trades.
For example, one needs to consider the importance of the trend, how to combine chart patterns with other tools, and how to take into account multiple timeframes when using chart patterns.
Conclusion
I hope you have enjoyed this guide on how to tackle price chart patterns.
Now I’ll like to hear from you: what is your key take-away from this trading guide?
What is your favourite price pattern setup for trading?
Do you have any difficulty identifying the patterns on your charts?
How can you combine these patterns with your existing trading tools?
Let me know by leaving a quick comment below right now.
I’m learning to be a scalp trader I’m going to implement patterns into my trading strategy which I haven’t before. My strategy is reading candle sticks but not the patterns. Thank you
You are welcome! As I mentioned in my “Beginner’s Guide”, there are 3 main kinds of analysis: classical (including chart patterns), price action (including candlestick patterns), and indicators. It is best to combine these methods together.
Hey Spencer, I usually prefer not to overclutter my trading charts with too many indicators. How many do you usually use yourself? I mean as a scalper, if there are too many indicators, I would have missed the opportunity.
I try to use as little as possible as well, so usually just a few moving averages and price action.
Good read thanks!
You’re welcome!
Appreciate the hard work done here!
You’re welcome!
I will say this website is beginner friendly. However, there is not much content after you have learned the ropes. Being a busy woman balancing work and family, I will appreciate if you have a daily market outlook report or some sort.
There are new market outlook that are posted every 2 to 3 weeks on his youtube and in his blog.
You can join our free Telegram channel for daily trading tips and market analysis: https://t.me/synapsetrading
Thank you so much for compiling all the information into one place, saved me a lot of time researching online!
You’re welcome! Our intention is to help people save time by compiling all the best learning resources in one place, glad you found it useful!
Hope to see more guides from you soon!
You’re welcome, and thanks for the support!
Very useful information. Bookmarked!
You’re welcome, I will continue to update and improve the guide!
Nicely summarized information and easy to digest. Thanks for the effort.
You’re welcome, I will continue to update and improve the guide!
Cool Stuff! I like the video tutorials 😀
You’re welcome! Let us know what new topics you would like to see!
Just here to leave a thank you note for the patterns. The pictures are helpful.
You’re welcome! Thanks for your feedback!
Will you be covering other topics like Ichimoku Cloud and Heinkin-Ashi Strategies in the future?
That is definitely possible, once we have covered all the more “mainstream” indicators and techniques. Stay tuned!
Waiting for more guides on such indicators 😀
Hey! Do you think if Fundamental Analysis is crucial as part of the analysis of what stocks to buy?
If you are looking to invest in stocks long-term, or as part of your portfolio, then you definitely will want to look at the fundamentals (solid business model, good growth prospects for the industry and stock, revenue, cashflow, etc). However, if you are trading it medium-term or short-term, then the fundamentals do not play such a major role.
Thanks for sharing about this. Got lost in whether I should use FA or TA for investing.
I am also not sure if I should be doing swing trading or position trading.
Hey mate, thanks for sharing these info. Do you have a video tutorial or podcast on this?
You’re welcome! Yes, we do have video tutorials, which you can find on our Youtube channel, and as for podcasts, that is something which we will be exploring this year. Stay tuned!
Do you have a tiktok account? It’s quite popular among my friends now.
Yes we do, you can search for @synapsetrading
Will you be covering on indicators which I saw like stochastic or which MAs do you use for trading?
Yes, we will definitely be covering those topics, but it will be in a different guide, likely one dedicated to indicators. Stay tuned!
You should cover Ichimoku Kinko Hyo. I highly recommend it.
Thanks for the suggestion, I will definitely touch on it when I have the time!
For the double top and double bottom pattern, must the 2nd top be higher or equal to the 1st top for us to consider it as a double top?
For the double top and double bottom, the 2nd top/bottom should be almost the same height as the 1st one, although quite often it can be slightly higher or lower.
Your information for the TA is well organized and detailed. Will you be doing something like that for fundamental analysis?
You are welcome! We might consider that in the future, but for now we want to complete all the different aspects of trading and chart analysis, before we go into fundamentals.
Hey, saw your website from the telegram channel. Btw, how do you use these techniques to determine when is the right price to enter during the Gamestop Stock Frenzy?
Firstly, that move was a fast and furious move that was news driven, so using price action and volume analysis would be more useful in this case. Secondly, price chart patterns tend to work better on a medium-term timeframe, where there us more time for the pattern to form. In such a fast-paced environment, maybe the flag pattern might have been useful.
I love your white board series video that I saw on your Tik Tok! Thats how I chance upon your free information guides.
You’re welcome!
Your tik tok videos are more interesting though!
Yup I am also subscribed to his tiktok channel. He has a recent one on Chinese chess too!
I love price action and the patterns. Already committed them to my brain but not to my heart.
Practice makes perfect!
Chart patterns feels like astrology. It gives you an insight on how active a market is from them. I focus more on volumes traded and directional (momentum) rather than a particular pattern instead.
Chart patterns actually give you an insight into human psychology, because it is a reflection of buyers and selling fighting to gain control. It can be used in conjunction with price action and volume as well.
Like how big whales like me can control the market sentiments by sharing and tweeting what I feel. Purely market emotions!
“When you are studying the chart pattern on the current timeframe, thinking about how the pattern on the larger timeframe looks like literally gives you a bigger picture, allowing you to strategize your trades better.”
I don’t get it. How will my strategy change just because a triangle pattern change to a pennant pattern?
For example, if a triangle pattern turns out to be a pennant on a larger timeframe, it means there is even more room for the trade to go, because you can then use the pennant on the larger timeframe to do another price projection. This means that you might want to hold the trade (or part of the trade) longer.
i actually printed some of the price patterns and paste them next to my screen, especially those reversal ones. Still new at this. So many patterns, not sure which one to apply.
I like your new layout for your guide now. Not so overwhelming.
Thank you for the concise guide. Fascinating to see triangles appearing near Support and resistance lines.
You are welcome!
Do these patterns apply for the cryptocurrenices too?
Yes, theses are universal patterns that work for all markets and timeframes!