Chart price patterns: head and shoulders, triangles, flags, and everything in between

Price patterns These are shapes that have repeated on charts for a hundred years, because the psychology that produces them doesn't change: hesitation, struggle, decision. A good pattern isn't just a nice drawing — it's a complete trade plan: it defines an entry level (the breakout line), an invalidation level (the opposite side of the pattern), and a measured target (the pattern's height projected forward).

Reversal patterns — the end of a trend

• Head and shoulders: A peak, a higher peak, and a lower peak — momentum breaks from peak to peak. A break of the 'neckline' confirms it. The most famous reversal pattern, and its mirror image (bottom) at the end of declines.
• Double bottom / double top: Two touches at the same level with no follow-through — the pushing side fails twice. Confirmation: a break of the high (or low) between the touches.
• Reversal patterns require a trend to reverse: A 'head and shoulders' in the middle of a sideways range is just noise shaped like a head and shoulders.

Continuation patterns — a pause along the way

• Flag: A sharp move (the 'pole') followed by a narrow, slightly counter-trend consolidation — the market takes a breather before continuing. A breakout of the flag in the direction of the pole is the classic entry.
• Triangles: A range that keeps contracting — the spring is being wound. An ascending triangle (flat ceiling + rising lows) statistically tends to break upward; a symmetrical triangle breaks in the direction of the preceding trend.
• Box/Range: Horizontal consolidation between two clear levels. The breakout from it — in either direction — is the event.

How to measure a target — and the rule that matters most

The old convention: The pattern's height is projected from the breakout pointA box with a height of 10 shekels that broke out at 100 — a measured target around 110. This isn't a law of nature but a scale, which gives proportion against the risk even before entry.

And the rule that matters most of all: A pattern without confirmation is just a suspicion. The trade is born when the decision line is broken — with volume Volume supporting it — not when the eye recognizes a familiar shape. Those who enter before confirmation are trading on imagination; those who wait for it are trading on fact. See also How to confirm a breakout.