Trading term
What is Chart pattern?
A chart pattern is a recognisable shape that price forms on a chart — like a triangle, head and shoulders, or double top — that traders use to anticipate the next move. Patterns are grouped into continuation (the trend resumes) and reversal (the trend turns) types.
Chart patterns are recurring formations in price that, historically, tend to be followed by a particular kind of move. They form because they reflect repeating crowd psychology — the same battles between buyers and sellers produce the same shapes. Traders sort them into two broad families. Continuation patterns (flags, pennants, triangles, rectangles) mark a pause before the existing trend resumes. Reversal patterns (head and shoulders, double tops and bottoms) mark the end of a trend and a turn the other way.
Every pattern comes with a rough playbook: a trigger (usually a breakout from the pattern), a measured target (often the pattern's height projected from the breakout), and an invalidation level (where the pattern is proven wrong). That structure — entry, target, and a clear point of failure — is what makes patterns useful. But they're probabilities, not certainties: patterns fail, and a pattern isn't 'complete' until price actually breaks out to confirm it. The best traders treat them as one input, not a crystal ball.
A recognisable shape — here a triangle — that price coils into and then breaks out of. Each pattern bundles a trigger, a measured target, and an invalidation level.
For example
A stock in an uptrend pauses and forms a small triangle (a continuation pattern), then breaks out upward — the trend resuming, roughly as the pattern's playbook predicts.
Go hands-on in Premium
That's Chart pattern in theory — it clicks when you read it on a live chart. Practise it hands-on in the TradeWize Premium Technical Analysis track.
Explore Premium →Why it matters to you
Chart patterns give a trader a shared, time-tested vocabulary for what price is doing and what tends to follow — each one bundling a trigger, a target, and an invalidation into a single recognisable shape. That structure turns a vague chart read into a defined, repeatable trade plan with known risk.
⚠ A pattern isn't confirmed until it breaks
The biggest mistake is trading a pattern before it completes — shorting a 'head and shoulders' at the right shoulder, or buying a 'triangle' before the breakout. Many would-be patterns never confirm; price does something else. A pattern is only a signal once price actually breaks out of it, and even then it can fail.