Pattern Trading Master Guide: Unleash Chart Patterns in 2024

15 Price Action Patterns Insiders are Using If a hedge fund managers were using 15 specific price action patterns would you want to know?

Our team at Trading Strategy Guides has developed a series of chart pattern articles. We like to call it the Pattern Trading Master Guide. These articles will enhance and elevate your trading to a new level. The techniques you learn will give you a framework to examine the fight between the bulls and the bears methodically.

By trading the most profitable chart patterns, you can deduce who is winning the fight between the bulls and the bears. This pattern trading guide can be used to identify chart patterns in stocks. It can also be useful for just about any instrument you are planning on day trading.

We share this because it will greatly improve your ability to understand price movements and price breaks. Ultimately, this will make you a much better trader. The key to this style of trading will be to identify how a pattern forms. Youโ€™ll also have a greater understanding of market analysis as a whole. This article will introduce several entry-level patterns and then dive into some special patterns.

These patterns are the symmetric triangle and double bottoms. We also believe that it is important to use these with pivot points as well. This type of training will set you apart from the average trader.

To start, I recommend getting some basic stock charting software (affiliate link) with some very simple tools, such as moving averages and other indicators. This can help you perform market analysis and also help you be in front of the charts when a pattern forms. The ascending triangle will be a valuable pattern in your trading arsenal.

The rounding bottom, head and shoulders patterns, inverse head and shoulders, reverse head and shoulders, triple bottom, cup and handle and the descending triangle, are also valuable. These patterns will help you find trade ideas faster than what the average trader will be able to find. It will help you make sure that you enter the trade at the right price levels.

These types of patterns will allow you to trade any currency pair. The trades are not dependent upon market trends or the economic calendar to find successful trades while day trading. This write-up will not be like other blog articles you have read. This is because we are going to give you step-by-step instructions on how to place trades using the exact price pattern for the strategy.

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Before we begin, thanks for visiting Trading Strategy Guides (TSG)! We are so glad youโ€™ve found us. You have discovered the most extensive library of trading content on the internet. Our aim is to provide the best educational content to traders of all stages. In other words, we want to make YOU a consistent and profitable trader.

If youโ€™re a brand new trader, we recommend hopping over to our ultimate beginnerโ€™s guide to trading to learn more.

If youโ€™re ready, letโ€™s begin The Pattern Trading Master Guide!

Intro: The Pattern Trading Master Guide

There are thousands of traders around the world that trade specific types of chart pattern formations like the triangle pattern. Famous trader Dan Zenger has turned $10,000 into $42 million in under 23 months by using a chart pattern trading strategy.

To truly succeed in trading, you can simply start to mimic what professional traders do. Begin to test the strategy and then measure the results.

We have dedicated a lot of time to studying price action. You can see some evidence by studying some of the best pure common chart pattern strategies here:

Letโ€™s move forward and define exactly what we are looking at. More importantly, we will define how we can profit from them.

What are Chart Patterns?

In technical analysis, chart patterns are price formations represented in a graphical way.

Without a doubt, this is one of the most useful tools when performing technical analysis of price charts. Chart patterns are a very popular way to trade any kind of market. The most profitable chart patterns give us a visual representation of the supply and demand forces. They also show the relative strength of the specific price levels.

Since weโ€™re on the supply and demand topic, we recommend studying more about this subject here: Supply and Demand Trading-Learn about Market Movement.

What makes chart patterns so appealing is that it also brings to light what happens behind the scene. This refers to the buying and selling pressure.

Most Profitable Chart Patterns
Chart patterns 1

Note* A chart has its own language and it speaks through chart patterns and they leave footprints of the big money or the smart money. These footprints can lead us into highly profitable trades.

Why Are Chart Patterns So Important?

If you remove all your indicators and momentum indicators from the charts, and everything else that might make your chart less clear, and just look at the price action, whether itโ€™s a 5-minute chart, daily chart or similar, itโ€™s your preferred time frame. Youโ€™ll actually gain more insights into what happens in the market.

Chart Patterns
Chart patterns 2

As long as the candlesticks have open, high, low and close prices; you can use them just to confirm your position or enter a new trade. You can build a really successful chart pattern trading strategy without the need for any other technical indicator. Here is an example of a master candle setup.

There are bullish and bearish chart patterns. What makes them work is that they tend to reoccur over time, making it possible to backtest them and find their probability of success rate.

What Types of Chart Patterns You Should Know

Throughout this article series, weโ€™re going to discuss how to make money with the most profitable chart patterns. Some of the most profitable chart pattern trading strategies include:

Earlier, we posted a clear price chart of the EUR/USD. But if you look closer and read the chart patterns language, we can identify some of the most profitable chart patterns (see figure below).

Price Channel Chart Pattern
Chart patterns 3

It doesnโ€™t matter what time frame or market you trade because chart patterns are present everywhere when there is a battle between buyers and sellers.

Letโ€™s discuss how we can use the trading strategy and make money trading in any market. The key is to look at the lower trend line and try to find a triple bottom show up anywhere on your chart.

Nextโ€ฆ

Weโ€™re going to reveal the truth about how to read chart patterns like a pro.

See below:

How Forex Chart Patterns Work

Chart patterns form due to the interaction between the buyers and sellers, which generally leads to the various chart patterns that you can see on your chart every single day.

Generally speaking, all chart patterns are looking at the interaction of supply and demand.

In other words, this constant battle between buyers and sellers so to speak gives birth to the many chart patterns youโ€™re probably trading right now.

Letโ€™s move onโ€ฆ

And see how to identify chart patterns

See below:

How to Read Chart Patterns

Forex chart patterns are a lot like those unrealistically perfect Instagram models.

The Instagram images look great but when you start to see the true reality, youโ€™re not that excited anymore.

Itโ€™s easy to only see those typical cases where chart patterns worked, but itโ€™s really hard to see when they didnโ€™t work. Weโ€™re conditioned to avoid pain so; itโ€™s easy to ignore the instances when a chart pattern didnโ€™t work.

So, in order to be able to trade chart patterns like the pros, you need to have a systematic approach to reading chart patterns. Otherwise, youโ€™ll continue chasing the fake Instagram models. But, when reality hits you, it will hit you where it hurts the most aka your wallet.

Nowโ€ฆ

Letโ€™s see how to recognize chart patterns like the pros.

There are really 3 major things that can be applied to any chart pattern:

  1. The first step is to assess the size and quality of the chart pattern relative to surrounding price action
  2. The second step is the location of the chart pattern. Where is the chart pattern located within the trend? Key swing high and swing low, Support and resistance levels, pivot points, etc.
  3. The last step is to assess the potential profit margin. If it doesnโ€™t offer a minimum risk:reward ratio of 1:1, itโ€™s not a good

Here is an example:

Candlestick Patterns Explained With Examples
Chart pattern trading

Nowโ€ฆ

If you want to learn what are the best chart patterns for day trading continue reading.

Chart Patterns for Day Trading

Speaking from my own experience the best day trading patterns are:

  1. Bullish flags and bearish flags
  2. Rectangle patterns
  3. Wedges and Pennant

Can you spot what all of these chart patterns have in common?

If your answer is:

โ€œThey are all defined by a period of consolidation after a strong up/down move.โ€

Youโ€™re right!

The probability of intraday trend continuation is extremely high.

Think of it in terms of the law of motion:

If you kick a ball, the ball will continue to stay in motion even if as time goes by the speed will slow down. The ball will still roll.

The same is with the price!

Chart Pattern Trading Strategy โ€“ Rules

We have developed five step-by-step guidelines that are important to take into consideration when trading any of the chart patterns:

Step 1: Always determine if the market is in trend mode or consolidating.

This step is important because, although some of these simple chart patterns often are forms of consolidation, they are actually continuation patterns of an underlying trend.

For example, a bullish flag pattern โ€“ read more about it HERE โ€“ is a pattern that forms after a larger move up. The pattern itself is just a brief form of relief, or consolidation, from the underlying trend, before breaking to new highs.

Chart Patterns Forex
Chart patterns 4

Basically, the bullish flag pattern is a continuation pattern.

We can distinguish mainly two types of chart patterns:

  • Continuation Patterns: signals that the trend will continue.
  • Reversal Patterns: signals the possible end of a trend and the start of a new trend.

An example of a reversal pattern is the double top pattern highlighted in the figure below:

Double Top Chart Patterns
Chart patterns 5

Itโ€™s important to determine whether the market is trading or consolidating. This is because it will reveal what type of chart patterns work best for each trading environment.

Note** The reason why many price action traders fail is that they donโ€™t follow this first rule. They try to trade every pattern regardless of the whole picture.

Step 2: Decide What Chart Patterns You Want to Use.

Do you like to trade reversal patterns or are you more comfortable trading continuation chart patterns?

Figure this out first! When you have decided which way to go, try to master the particular trade setup.

Repetition is the mother of all learning. The more you trade the most profitable chart patterns, the better youโ€™ll become at spotting these chart patterns in real-time.

Our team at TSG is a huge fan of the triple top chart pattern. This is because of the potential profit available once a new trend has developed.

Chart Patterns For Day Trading
Triple top chart pattern

Step 3: Look for the Story in the Chart Patterns.

What you have to do here is to construct a story behind your favorite setups.

What do we mean by that?

Simply, look at the whole price picture, donโ€™t just focus on the chart patterns. What you need is for this story to confirm your price action pattern. Everything else must point in the same direction. Finding the proper direction to place your trades will help you to increase your win rate.

Technical Analysis Patterns
Technical analysis chart pattern

For example, the narrative behind the bullish flag highlighted in Step #1 is easy to spot. Weโ€™re moving in an uptrend because we have developed a series of higher highs and higher lows.

Secondly, we broker and close above an old high; no resistance spotted above market price are all good ingredients. They speak volumes in favor of our bullish flag pattern.

Step 4: Trade Chart Pattern Trading Strategy in Confluence With Good Price Location.

Chart patterns work best in conjunction with a good price location which can add confluence to our trade.

What do we mean by price location?

In simple terms, a price location is just an important area on the chart where we normally expect a price reaction. That price location can either be a support/resistance level, swing high/low points or some pivot points. The location can even be technical indicators if you combine the two.

Reversal Patterns Technical Analysis
Chart patterns 8

For example, the price channel pattern highlighted in figure 3 worked out because we had confluence with the higher time frame resistance level. The EUR/USD was simply trading in an upward channel, but heading right into a resistance level.

Step 5: Make Non-Subjective Trading Rules for Trading Chart Patterns.

The last step to build a chart pattern trading strategy is not just to have some non-subjective trading rules. But, also written in stone trading rules.

While you do need to follow your plan strictly, it can be adjusted along with changing market conditions

There are many possible ways a trader can profit from these chart patterns.

Here is one example:

Metode Chart Patterns
Metode chart pattern

For example, the bullish flag pattern can enter at the retest of the flag support or the breakout above the flag. You can also trade with the breakout triangle strategy.

Become a master of only one setup and one chart pattern trading strategy. Prove to yourself that you can be profitable trading one pattern before you move on. In simple terms, find a pattern that you like and become very good at that chart pattern trading strategy.

Chart Pattern Trading Master Guide Video

The Pattern Trading Guide FAQ

How many chart patterns are there?

There are countless chart patterns that can be categorized into two types: continuation and reversal patterns. Market technicians use chart patterns to better time the market. Check our chart pattern trading strategy step-by-step guide list to get started with technical analysis.

Are chart patterns reliable?

Yes! Chart patterns are a reliable form of trading that can help traders make accurate predictions. Some of the most successful traders in the world with years of trading experience have admitted that they owe their success to chart patterns.

Do chart patterns work?

Absolutely Yes! The truth about chart patterns is that they work in the right market context. The price action is the ultimate force that tells the market story and tells you about the things that happen behind the curtain. If you learn to read chart patterns correctly, you can anticipate with ease future market trends.

Which candlestick pattern is most reliable?

The double top and double bottom are the most reliable candlestick patterns. Other powerful candlestick patterns are the Abandoned Baby, the three black crowds the NR4 pattern. Not all candlestick patterns are created equal. In other words, some candlestick patterns are more reliable than others.

Which is the best bullish candlestick pattern?

The bullish engulfing pattern is the best bullish candlestick pattern. Using bullish candlestick patterns is helpful to buy stocks, currencies, crypto, commodities, etc. Generally, bullish candlesticks are useful to predict the end of a downtrend and the start of a new uptrend.

Which is the best bearish candlestick pattern?

The Head and Shoulder pattern is the best bearish candlestick pattern. The H&S price formation signals a shift in sentiment from bullish to bearish. Statistically, the Head and Shoulder pattern is considered to be the most reliable trend reversal pattern.

Conclusion โ€“ Pattern Trading Master Guide

We hope you enjoyed this Pattern Trading Master Guide.

We can fast-track your career by giving you the most profitable chart patterns, which is easy. But the one thing we canโ€™t give you is screen time and experience. Thatโ€™s something that you need to gain over a period of time. Below is another strategy called trading volume in Forex.

When it comes to developing a chart pattern trading strategy, there are no magic bullets. This is because youโ€™re going to make mistakes. Secondly, youโ€™ll still be having losing trades. The whole idea is to become selective on the chart patterns you trade.

Check out our Ultimate Guide On Building a Trading Strategy!

Thank you for reading!

Please leave a comment below if you have any questions about our Chart Pattern Trading Strategy!

Please leave a comment below if you have any questions about this strategy!

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At Trading Strategy Guides, we want to make sure you understand the marketโ€™s momentum before entering in a trade.

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Chart Pattern Trading Strategy PDF

Chart Pattern Trading Master Guide Strategy Pdf
Chart pattern trading infographic

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15 Price Action Patterns Insiders are Using If a hedge fund managers were using 15 specific price action patterns would you want to know?

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  1. Thatโ€™s really awesome & professional keep it up , What is your advice to get more about fundamental analysis ?
    Thanks

  2. Very informative, currently building all this into an expert advisor to automate everything, good source of info, thank you.

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