From triangles to head-and-shoulders, chart patterns help forecast future price moves.
Chart patterns emerge when price swings form recognizable shapes on a chart. These formations capture the psychology of market participants and can hint at whether trends will continue or reverse.
Continuation setups include triangles, rectangles and pennants that pause before resuming the prior trend. Reversal patterns like double tops or head-and-shoulders often appear near major support or resistance zones.
Volume plays a key role: contracting volume during a pattern usually precedes an expansion on the breakout. Measuring the height of the pattern helps estimate potential targets.
While patterns are never foolproof, they provide a structured way to assess probability and manage risk when combined with other technical indicators.