Chart patterns: what they are and how to trade them

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A chart pattern is a shape price makes as buyers and sellers fight. The useful ones end in a breakout: a candle that closes outside the shape, which is the signal traders act on. How every pattern works Price coils inside a shape (a triangle, a flag, a range). It breaks out: a candle closes outside the line. A wick poking through is not a breakout (why the close matters). Traders put the stop on the other side of the pattern and aim the target at the move the pattern points to (plan the trade). Price coils inside the shape, then a candle closes through the line Continuation patterns (the trend carries on) Triangles: symmetrical, ascending and descending Flags and pennants Rectangles Cup and handle Reversal patterns (the trend turns) Head and shoulders, and the inverse Double top and double bottom Rising and falling wedges Our own The Hot Dog pattern, three candles that set up a breakout Practise spotting them on real charts with Replay, before you trade them.