Blog / Technical

Chart Patterns: Head and Shoulders, Triangles, Flags and Double Tops

The main reversal and continuation chart patterns, how to measure targets and why failed patterns matter.

Reversal patterns

Head and shoulders: three peaks with the middle one highest; a break below the neckline signals a possible trend change. Double top and double bottom: two failed attempts at the same level. Measure the target by projecting the pattern height from the breakout point.

Continuation patterns

Flags and pennants are brief pauses after a sharp move; triangles (ascending, descending, symmetrical) are compressions. The usual expectation is a break in the direction of the previous trend, with the target equal to the prior move or the triangle height.

How to trade them

Wait for a close beyond the pattern boundary, ideally with higher volume on stocks and crypto. Enter on the break or on a retest, put the stop on the other side of the pattern and make sure the target is at least twice the risk.

Failure is information

Patterns fail often. A failed head and shoulders that reverses back above the right shoulder is itself a strong signal in the opposite direction. Have a plan for being wrong before you enter.

Example: measuring a target

A double top forms with peaks at 1.2000 and a low between them at 1.1850. The pattern is 150 pips tall. When price closes below 1.1850, the measured target is 150 pips below the neckline: 1.1700.

A trader sells on the break or the retest, puts the stop above the second peak and checks that the reward to the target is at least twice the risk before entering.

Questions to ask before trading a pattern

Is there a clear prior trend for the pattern to reverse or continue? Did the pattern take a reasonable time to form? Is the breakout candle strong, ideally with higher volume? Is there a nearby level that could stop the move? How much would a failure cost? If you cannot answer these, skip the pattern.

Key takeaways

  • Patterns are about supply and demand shifts.
  • Targets come from the pattern height.
  • Confirm with a close beyond the boundary.
  • Failed patterns are signals too.

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Educational content, not financial advice.