What are chart patterns?
Chart patterns are recognisable shapes formed by price movement. They reflect the battle between buyers and sellers and help traders anticipate the next likely move. Patterns fall into three groups:
- Reversal patterns — signal a trend change.
- Continuation patterns — signal the trend will resume after a pause.
- Bilateral patterns — breakout can happen either way.
Reversal patterns
Continuation patterns
Triangles & wedges
How to trade chart patterns
- Identify the prior trend — reversal patterns need a trend to reverse.
- Wait for confirmation — a candle close beyond the neckline / trendline.
- Check volume — genuine breakouts usually come with rising volume.
- Entry — on breakout, or on a retest of the broken level (safer).
- Stop-loss — just beyond the opposite side of the pattern or the last swing.
- Target (measured move) — project the pattern's height from the breakout point.
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Common mistakes
- Seeing patterns that aren't there (forcing the shape).
- Entering before confirmation.
- Ignoring the higher-timeframe trend.
- No stop-loss on "sure-shot" patterns — no pattern works 100% of the time.
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Educational content only — not investment advice. Rules and tax rates mentioned are as understood at the time of writing and may change; verify with official sources (SEBI, RBI, Income Tax Dept.) or a qualified adviser.