Pattern Price: The fundamental basis of technical analysis and the patterns traders should remember

What is the (Price Pattern) and Why Is It Important?

When it comes to technical analysis in financial markets, traders need to be familiar with the concept of Price Pattern, which is also known in academic and investment circles as Chart Pattern. This is a method of studying price behavior by observing recurring formations in the past. The fundamental idea is: if a price pattern occurs multiple times, it will likely happen again in the future.

Price Pattern reflects the battle between (Demand) from buyers and (Supply) from sellers in the market. When you can read these signals, you increase your chances of predicting where the price will move next.

The best part is: you don’t need to be a professional analyst. Beginner traders can learn and apply these patterns because the methods are quite straightforward. This makes Price Pattern one of the most popular basic tools in trading communities worldwide.

Categorization of Price Patterns: 3 Main Types

Experienced traders will tell you that trying to memorize all patterns without a system can lead to confusion. Therefore, patterns are grouped into clearer categories:

###Group 1: Reversal Patterns(

These are warning signals that the current trend is about to end, and the market is preparing to reverse direction.

Reversal patterns often occur at “turning points” — when the price reaches a high or low. These patterns also show that buying and selling forces are clashing intensely. Coincidentally, this struggle often ends with one side winning, leading to a trend reversal.

)Group 2: Continuation Patterns###

This is easier to visualize: an uptrend or downtrend pauses to “breathe” before continuing in the same direction.

These patterns occur when some traders decide to pause, but the overall trend remains strong. Therefore, after this brief pause, the price resumes its previous strong movement.

(Group 3: Unclear Patterns)

These are “indecisive” patterns — they don’t tell you whether the price will go up or down. It’s like the market is deciding, and you need to wait and see what it will say.

The market stalls when buying and selling forces are exhausted. Whenever one side begins to weaken, the true direction of the price will eventually reveal itself.

10 Price Pattern Types Everyone Should Know

1. Head and Shoulders: Signals from the Head and Shoulders

This pattern is often seen when an uptrend is ending. The Head and Shoulders has an easily recognizable shape: left shoulder, head (peak), and right shoulder.

Sequence: price rises to a high ###left shoulder(, falls back, rises higher than before )head(, falls again, rises but not as high as the head )right shoulder(, then breaks down decisively.

When the price breaks below the “neckline,” it signals that the bull market is ending. To find the target price: measure the distance from the head to the neckline, then project that distance downward from the breakout point.

) 2. Double Top: Two Peaks and a Reversal

Double Top is simpler than Head and Shoulders — it has just two peaks (Top 1 and Top 2) that are nearly equal.

Meaning: the price tries to break through a new high but fails. It tries again but still can’t. This signals that buyers are losing strength, and it’s time for sellers to take control.

Target price: measure from the double top peak down to the neckline, which indicates how far the price might fall.

3. Double Bottom: The Deepest Trough

Double Bottom is like Double Top but inverted. It occurs at the lowest point, indicating sellers are exhausted.

Pattern: the price drops to a low (Bottom 1), rebounds, drops again ###Bottom 2( but not below the first low, then rebounds above the neckline.

This signals that the bear market may be ending. To measure the target: do the same as Double Top but upward from the breakout.

) 4. Rounding Bottom: Smooth Curved Line

This pattern looks like a half-circle at the bottom, with no sharp peaks but a gradual transition.

Meaning: the market slowly shifts from a downtrend to an uptrend. Selling pressure weakens while buying gradually returns.

When the price breaks out above the highest point of this curve and crosses the neckline, it confirms that an uptrend has begun.

( 5. Cup and Handle: The Coffee Cup with a Handle

This is a continuation pattern of the Rounding Bottom but a bit more complex: a deep curve )cup###, followed by a slight consolidation ###handle(, then a breakout.

Sequence: the price forms a U-shape )cup(, rises close to the neckline, dips slightly )handle(, then moves above the neckline.

Target price: similar to the Rounding Bottom — measure from the lowest point of the cup to the neckline.

) 6. Wedges: Narrowing Triangles

Wedge patterns resemble triangles but serve different purposes:

Rising Wedge (upward slanting wedge): occurs when prices rise but momentum slows. It’s a bearish sign, indicating trouble for the bull market, which may end soon.

Falling Wedge ###downward slanting wedge(: opposite — prices decline but momentum slows. It’s a bullish sign, suggesting the bear market is losing strength.

) 7. Pennants and Flags: Market Banners

Both Pennants (small triangles) and Flags ###rectangles( are patterns that form after a strong price move, followed by a brief consolidation.

It indicates: the main trend remains strong, just taking a short breather. When the price breaks out from a Pennant or Flag, it often continues in the same direction.

Target: use the height of the “banner” )the strong move before consolidation( and add it to the breakout point.

) 8. Ascending Triangle: Upward Sloping Triangle

This pattern has rising lows but a flat high at the top, suggesting buyers are gaining strength.

Key point: Ascending Triangle often signals that the uptrend will continue. When the price breaks above the resistance, it usually moves higher.

( 9. Descending Triangle: Downward Sloping Triangle

Opposite of Ascending — the highs break downward while lows stay flat. This indicates the downtrend is likely to persist.

) 10. Symmetrical Triangle: Balanced Triangle

This pattern occurs when neither buyers nor sellers dominate — both sides are equally strong. The price narrows into a triangle shape.

When a breakout occurs, it indicates which side has gained control, and the trend will follow.

What Traders Should Remember About Price Patterns

Subjectivity Factor: Reading Price Patterns is not an exact science. Two traders may see the same pattern but interpret it differently.

Short Timeframe Issues: The shorter the timeframe, the more “noise” there is. Patterns visible on weekly charts may be unreliable on 1-minute charts.

Volume Matters: Patterns without significant trading volume are less trustworthy. Always check volume multiple times.

Avoid Relying on a Single Indicator: Many traders make the mistake of using only Price Pattern for decisions. It’s risky. Combine with other indicators like oscillators, support-resistance levels, or momentum for higher accuracy.

Consistent Practice: The skill of reading Price Patterns improves with regular practice. Study many charts and keep notes.

Summary

Price Pattern acts as a common language that helps traders communicate with the market. It’s not a perfect tool, but when used correctly, it can significantly improve the chances of predicting price directions.

For both beginners and experienced traders, understanding and applying Price Patterns carefully is a crucial step toward building an effective trading system. Remember: it’s not just about the pattern alone, but about integrating knowledge, observation, and cautious decision-making.