Why Patterns Persist

Patterns visualize crowd behavior: compression, continuation, and distribution/accumulation. They’re frameworks for planning risk, not crystal balls. Combine them with trend context, volume, and volatility.

Clean sketches: symmetrical triangle, bull flag, head & shoulders (H&S), inverse H&S.

Triangles: Coiling Energy

• Entry: Break of triangle boundary with volume.
• Stop: Opposite side of the pattern or false-break low/high.
• Target: Height of triangle projected from breakout.

Flags: Continuation After Impulse

• Entry: Break of flag channel in direction of prior move.
• Stop: Beyond the opposite flag boundary.
• Target: Prior impulse length measured from breakout.

Head & Shoulders: Reversal Blueprint

• Neckline Break: Confirmation of pattern; volume should expand.
• Stop: Above right shoulder (H&S) or below (inverse H&S).
• Target: Distance head-to-neckline projected from break.

H&S example with neckline, target projection, and invalidation.

Common Pitfalls

• Forcing patterns in random chop.
• Ignoring higher timeframe trend (countertrend patterns fail more).
• Skipping volume confirmation on breakout.

Pattern Trading Checklist

• Clear structure and boundaries?
• Volume behavior supportive?
• Defined stop and measured target?
• Confluence with levels or moving averages?