Chart Patterns - Geometric Market Structure
Learn major chart patterns - from reversal head & shoulders to continuation flags and bilateral triangles.
What are Chart Patterns?
Chart patterns are distinct formations created by price movements on a chart. They are the footprint of smart money and provide high-probability clues about future price direction.
Reversal Patterns
Head and Shoulders
A reliable top/bottom reversal pattern. Consists of three peaks, with the middle one being the highest.
Double Top / Bottom
Price tests a level twice and fails to break. Indicates strong resistance or support.
Continuation Patterns
Bull/Bear Flags
A brief consolidation after a sharp move. Usually leads to another move in the same direction.
Pennants
Similar to flags but with converging trendlines. Indicates a squeeze before trend resumption.
Bilateral Patterns
Symmetrical Triangles
Price range narrows into a point. Can break out in either direction, often leading to a large move.
Ascending / Descending Triangles
One flat side and one sloping side. Usually breaks in the direction of the flat side.
How GarudaAlgo Uses Chart Patterns
GarudaAlgo Enhancement
GarudaAlgo employs computer vision algorithms to identify geometric patterns on the chart. Our system automatically draws trendlines and necklines, alerts you when a breakout is occurring, and calculates the measured move target.
Pattern Weight in Signal System
Geometric chart pattern analysis contributes 15% to the overall signal confidence score.
What GarudaAlgo Analyzes
- Trendline Detection: Automatically identifies support and resistance slopes
- Breakout Confirmation: Filters out 'fakeouts' using volume and candle close
- Target Projection: Calculates the mathematically expected profit target
- Pattern Quality Score: Rates formations based on touch points and duration
Trading Strategies
Strategy 1: The Measured Move
- Identify a completed chart pattern (e.g., Double Top)
- Measure the height of the pattern from peak to neckline
- Project that same distance from the breakout point
- Set target at the projection and stop loss inside the pattern
Strategy 2: Break and Retest
- Wait for price to break a major pattern trendline
- Do NOT enter immediately; wait for price to return and touch the broken line
- Enter when price rejects the retest with a reversal candle
- Highest probability entry for pattern trading
Strategy 3: The Squeeze (Triangle) Trade
- Identify a Symmetrical Triangle with at least 4 touch points
- Wait for the 'Apex' - the point where lines meet
- Place buy/sell stop orders above and below the triangle
- Ride the volatility expansion as price breaks out
Best Practices
- Volume is your friend — Real breakouts are usually accompanied by a volume spike
- Beware of fakeouts — Wait for a candle to close outside the pattern to confirm
- Patterns on H1/H4 are best — Lower timeframes contain too much noise for reliable patterns
- Combine with trend — A continuation pattern in a strong trend is higher probability than a reversal