⚠️ Risk warning: CFDs and leveraged forex are complex instruments with a high risk of losing money rapidly. Most retail accounts lose money. This content is education only, not investment advice or a recommendation.
A chart pattern is a shape that the swing points of market structure often make before a trend continues or turns. Patterns are useful because they give you a clear level where the idea is confirmed and a clear level where it is wrong. They are not a forecast: plenty of patterns never complete, and completed ones often fail.
Reversal patterns
- Double top: two highs at roughly the same level with a pullback low between them. That low is the neckline. The pattern is only complete when price closes below the neckline. A double bottom is the mirror image.
- Head and shoulders: a high (left shoulder), a higher high (head) and a lower high (right shoulder). The line through the two lows between them is the neckline. In market-structure terms, the right shoulder is a lower high and the neckline break is a break of structure. The inverse version forms at lows.
Continuation patterns
- Flag: a strong, fast move (the pole) followed by a small channel that drifts gently against it. A bull flag drifts down or sideways after a rally; a bear flag drifts up after a drop.
- Triangles: price makes a series of smaller swings between two converging lines. An ascending triangle has a flat top and rising lows; a descending triangle has a flat bottom and falling highs; a symmetrical triangle has both lines sloping towards each other. Treat the break of a boundary as the event, not the shape.
The measured move
Traders project a pattern's height from the breakout point: for a double top, the distance from the highs to the neckline, subtracted from the neckline. It is a reference for planning, for example to judge whether a trade's reward is worth its risk. It is not a target price will reach.
Why patterns fail, and what to do about it
- Seeing them too early. Two highs are not a double top until the neckline breaks. Many "double tops" simply become a range or a continuation.
- Ignoring the trend. A bull flag inside a strong D1 uptrend is a different proposition from one against it.
- No invalidation level. Decide before entering where the pattern is wrong: for a double top, typically above the second high or back above the neckline after the break.
This lesson is educational. Patterns describe what price has done; none of them guarantees what price will do next.
🛠️ Practice task
Use a real chart. This is for practice, not for placing a trade.
- Open gold (XAU/USD) on H4 in TradingView or MT5 and scroll back three months. You can check the live price on the Invvex gold page.
- Find one double top or double bottom and one flag. Draw the neckline or the flag channel.
- For each, write down: the confirmation close, the invalidation level and the measured move.
- Check what happened next. Did the pattern complete? Did price reach the measured move, stop short or fail?
- Repeat on Saudi Aramco (2222) daily. Note how many "patterns" never broke their neckline.
🎯 Mark this chart
Study the drawing, pick the letter, then check. This exercise does not count toward your progress; the quiz below does.
✍️ Quick quiz
Check what you learned. Your answers stay in this browser.