Chart patterns cheat sheet

Chart pattern is one of the most important to understand in Trading. Whether you are doing Forex Trading, Crypto, or Stocks. Chart Pattern is the key element to price action. To learn price action and use it properly, firstly you have to understand what is chart pattern and how different chart pattern works. In this Chart patterns cheat sheet. We are going to cover all the important and most-used chart patterns in trading.

Why Everyone Should Know About Chart Patterns Cheat Sheet?

As traders, we all know that chart patterns move according to price action. What is price action? Price action is a price movement of an asset that depends on many factors. As the price does not always move straight up or straight down. It always moves like a (V) shape and makes higher highs, higher lows, lower highs, and lower lows. According to this movement chart patterns are introduced. Chart patterns are special patterns that help us predict the next possible movement of price. Like double top, double bottom, and so on.

The chart patterns cheat sheet will help you to a better understanding of how price action works according to the chart patterns. What criteria need to be formed in a chart pattern before opening a trade? And other important confirmations with it.

Double Top Chart Pattern

What is a Double Top Chart Pattern?

A Double top Chart Pattern is a bearish reversal chart pattern that forms after an asset makes two highs in a row of price and then declines after two highs. The pattern is confirmed when it breaks the support zone of two highs below.

How To Trade On Double Top Chart Pattern?

When a price movement makes two highs consecutively and then breaks the lows. When it breaks the second high low then it confirms the pattern. It is a strong bearish reversal pattern. Set a stop loss of the last higher low. And set a risk-reward ratio of 1:2. Though it is a break-out strategy. There is no confirmation needed. Additionally, you can add a volume indicator. If the candle is a big candle and its volume is high. Then it’s a real breakout. Not fake out.

Double Bottom Chart Pattern

What is a Double Bottom Chart Pattern?

Double-top and Double bottom chart patterns are widely used in the trading world. Because both of these two pattern are easy to catch. Even a beginner trader can mark them when they are formed. And also because of its simplicity.

The double bottom chart pattern is a strong bullish chart pattern. It’s the totally opposite of the double-top pattern. A double-top chart pattern is an (M) shape and a double-bottom chart pattern is like (W) shape.

How To Trade On a Double Bottom Chart Pattern?

A double-bottom chart pattern is a bullish pattern that forms after two consecutive lows and when it breaks the resistance zone. Then it confirms the pattern. It is also a breakout strategy. So to be safe from faking out you must see the candle size and its volume. High volume indicates that the breakout is real.

Triple Top Chart Pattern

What Is Tripple Top Chart Pattern?

A triple-top chart pattern is a kind of pattern that is used in technical analysis to identify its bearish price movement. A triple-top chart pattern has three peaks that tell us that the market has reached its highest point and from that point, the market may fall.

How To Trade On Triple Top Chart Pattern?

A triple-top chart pattern has three consecutive peaks and when it breaks the first second low which is called the neckline then it confirms the pattern and indicates us to take trade in the bearish market. It’s a strong bearish reversal pattern. The confirmation candle must have a high volume.

Triple Bottom Chart Pattern

What Is Triple Bottom Chart Pattern?

A triple-bottom chart pattern is a strong bullish reversal pattern that works and looks totally opposite to a triple-top chart pattern.

How To Trade Triple Bottom Chart Pattern?

After two higher peaks, the third one breaks the other two highs which is called the neckline. After breaking the resistance zone. You can trade it with the confirmation of the Marubozu candle with its high volume.

Head and Shoulder Chart Pattern

What Is Head and Shoulder Pattern?

Head and Shoulder Chart Pattern is a very reliable chart pattern according to many professional traders and analyses. You can understand the pattern by its name. Like a triple-top pattern, it has three highs. But a little bit different from triple top. There are two highs which are called the shoulder and the middle high is called the head. The head is higher than the other two shoulders. The shoulder peaks can be equal to each other or a little bit bigger or smaller. But they have to become smaller than the middle one. Otherwise, it won’t be called a head and shoulder pattern.

How To Trade On Head And Shoulder Chart Pattern?

A Head and shoulder chart pattern is a strong reversal point. When it meets all of its criteria like first forms the shoulder then the head and after that again a shoulder forms. Then it is called a head and shoulder pattern. After breaking the neckline in the support zone we will take trades with all other confirmations.

Inverse Head And Shoulder Chart Pattern

What Is the Inverse Head And Shoulder Chart Pattern?

The inverse head and shoulder chart pattern is also known as the head and shoulder bottom pattern and reverse head and shoulder pattern. But all of them are the same. By its name, you can understand that it is the same as the head and shoulder pattern but inverse.

How To Trade On Inverse Head And Shoulder Pattern?

The inverse head and shoulder pattern is a strong bullish reversal pattern. It has two down shoulders by two corners and a down head in the middle. It can be easily spotted in the chart. A lot of traders are using this chart pattern to be profitable.

Cup And Handle Chart Pattern

What is the Cup And Handle Chart Pattern?

A cup and handle chart pattern is a kind of price action pattern that makes a price action like a cup and handle shape. It’s a bullish pattern. The cup is shaped like a (U) and the handle has a slight downward drift.

How To Trade With Cup And Handle Chart Pattern?

Just like others pattern cup and handle is not a reversal pattern. It’s a bullish continuation pattern. The logic behind the cup and handle pattern is when a cup from the seller tries to push the price down and consolidate for some time and form a handle shape of the cup. But the buying pressure makes the continue to the uptrend.

Inverse Cup And Handle Chart Pattern

What is the Inverse Cup and Handle pattern?

The inverse cup and handle pattern is the opposite pattern of the cup and handle. This pattern is a very complicated pattern. Hard to identify and hardly find the pattern once in a day. However, the accuracy level is very high in this pattern. It takes time to master this pattern.

How To Trade On Inverse Cup And Handle Pattern?

This pattern is a bearish trend continuation pattern. As I mentioned before do not trade with these patterns after breaking out the handle pattern on the downside. Take a put trade with the other confirmations like big candles with high volume and so on.

Flag And Pole Pattern

What Is Flag And Pole Pattern?

Flag and pole is a chart pattern in technical analysis that is formed in a sharp move of any direction. It could be upward or downward side on the chart. Then consolidate for a while and again continue the trend.

The flag and pole pattern is a continuation chart pattern. It is called Flag and Pole because of its appearance on the chart.

How To Trade Flag and Pole Chart Patterns

Flag and pole is a continuation chart pattern. The starting point of the flag and pole pattern is very sharp at the pole. It could be any side. After that, the price consolidates for some time in the opposite direction of the pole and then breaks out of the pole’s direction and continues the trend. There are two types of Flag and pole pattern.

1. Bullish Flag and Pole Pattern: the bullish pattern is a bullish continuation pattern. It breaks out the flag pattern and continues to the up trend.

2. Bearish Flag and Pole Pattern: The bearish flag and pole pattern is a bearish continuation pattern. After consolidating on flag area. It breaks the support zone of the flag and continues to downtrend.

Triangle Chart Pattern

What Is Triangle Chart Pattern?

A triangle chart pattern is a technical analysis tool that helps traders trade on a particular price action shape called the triangle. The triangle chart pattern is named as such it is shaped like a triangle. A triangle is a continuation chart pattern. A triangle chart pattern looks like almost wedges and pennants.

How To Trade On Triangle Chart Pattern?

There are three types of triangle patterns.

1. Ascending Triangle: An ascending triangle pattern is a bullish continuation pattern. It breaks out from the upper side. The triangle pattern is drawn by two horizontal trend lines. The market structure makes equal highs in the upper trend line and higher lows In the other trend line. At least 3 equal highs and higher lows are needed to form an ascending triangle pattern. After breaking out from the resistance zone. The market continues to uptrend.

2. Descending Triangle: A descending triangle pattern is a bearish continuation pattern. It breaks out from the downside. Like an ascending triangle, it needs two horizontal trend lines that are going downward. To form a perfect descending triangle it needs three equal lows from down downside trend line and three lower highs of the other trend line Like the image above.

3. Symmetrical Triangle: A symmetrical triangle consists of a diagonally descending upper trendline and a diagonally ascending lower trendline. When the price moves to the top, it will certainly cross the upper trendline to form a breakout and a bullish price trend or cross the lower trendline to form a breakout and a downtrend with falling prices.

Traders should watch for a spike in volume and at least two closes outside the trendline to confirm the breakout is valid and not a fake. Symmetrical triangles tend to be continuation breakout patterns, meaning they tend to break out in the direction of the initial movement before forming the triangle. So, if an uptrend precedes a symmetrical triangle, traders will expect the price to break through the uptrend.

Wedge Chart Pattern

What Is a Wedge Chart Pattern?

The wedge chart pattern is also like a triangle chart pattern. Two trend lines are drawn to connect respective highs and lows to make the pattern accurate. Wedges chart patterns can be continued and reversal too. There is a misconception that a wedge has only a reversal point. But it could be a reversal or continuation. This chart pattern has a very good record of forecasting price reversals. How To Trade With Wedge Chart Pattern?

There are two types of wedge chart pattern.

1. Rising Wedge Pattern: In the rising wedge pattern it creates continuously higher highs and higher lows. The higher highs and higher lows are marked by two trend lines. When it can’t make another higher high and break out the last higher low from the downside. Then it’s a sign of reversal. A rising wedge needs at least three higher highs and three higher lows to form a perfect rising wedge.

The logic behind this pattern is. The buyer makes new higher highs and pushes the market up. But at last, the buyers are exhausted and can not make new higher highs. Then the seller enters the market and pushes the market down.

2. Falling Wedge Pattern: Like a rising wedge, a falling wedge does its opposite. It makes lower lows and lower highs. At least three lower lows and lower highs. It’s a bullish reversal pattern.

The logic behind a falling wedge is the opposite of a rising wedge. The seller can not make a new lower-low because of exhaustion and then the buyers enter the market and push the market up.

Final Words

The chart patterns cheat sheet will help you to understand the price action and price movement. It also helps you to become a better trader. But this chart pattern cheat sheet will not guarantee you to be 100% perfect every time. No strategy is 100%. It’s proper risk management, money management, and risk-reward ratio that helps you be profitable.

Do not use only this chart pattern. Use more confirmation with it to increase your accuracy. You can combine candlestick patterns with it for confirmation or add a moving average strategy to increase the win rate with the help of the chart patterns cheat sheet. Use a good reputed broker like Exness, FBS, or M4Markets to get bonuses, 24/7 customer care, and instant withdrawal.

You don’t need to use all these patterns in your trading plan. Choose only one or two chart patterns from this chart patterns cheat sheet. Practice it over time and time. Master that pattern. Increase your accuracy. Learn from the mistakes. I know a lot of millionaire traders who only trade on double-top and double-bottom patterns. That’s why use only one pattern and master that. Thanks for reading. Hopefully, you learn something new. Let me know in the comments and good luck.