What it is

One of the most recognised reversal patterns. Forms at the top of an uptrend with three peaks: a left shoulder, a higher central peak (the head), and a right shoulder roughly equal to the left. The two troughs between the peaks form the neckline. The pattern triggers when price closes below the neckline after the right shoulder forms. The Inverse Head and Shoulders is the mirror image at the bottom of a downtrend.

How to trade it

Entry: Short on a confirmed close below the neckline. Conservative traders wait for a retest of the broken neckline as resistance.

Stop loss: Above the right shoulder high.

Target: Project the distance from head peak to neckline downward from the breakout point (measured move).

What it is

A Double Top forms when price hits the same resistance level twice, creating an “M” shape, then falls back below the neckline (the trough between the two peaks). A Double Bottom is the mirror “W” shape — price tests the same support level twice and bounces above the neckline. The second peak or trough should be at approximately the same level as the first, confirming the rejection.

What it signals

A defined price level has been tested and rejected twice. For the Double Top, buying pressure is exhausted at resistance and sellers take control on the neckline break. For the Double Bottom, sellers twice failed to push below support — buyers absorb supply and a bullish reversal follows. Volume on the second peak/trough is often lower than the first, confirming weakening momentum.

How to trade it

Entry (Double Top): Short on a close below the neckline. A retest of the neckline from below as resistance offers a lower-risk entry.

Entry (Double Bottom): Long on a close above the neckline, or on a pullback to the broken neckline acting as new support.

Stop loss: Just beyond the second peak (Double Top) or second trough (Double Bottom).

Target: Measure the height from neckline to the peaks/troughs and project that distance from the breakout/breakdown point.

What it is

Wedges are defined by two converging trendlines — both angled in the same direction, with the upper line rising or falling more steeply than the lower. A Rising Wedge slopes upward with both trendlines converging as price makes higher highs and higher lows, but with narrowing range. A Falling Wedge slopes downward the same way. The wedge “compresses” price until it breaks out.

What it signals

Despite making higher highs, the Rising Wedge shows weakening momentum — buyers are losing energy as the range narrows. When support breaks, the resulting move is often sharp and swift. The Falling Wedge is deceptively bullish: sellers are losing power even as price drifts lower, and the breakout typically produces a strong upward move. Both patterns are most reliable when they follow an extended prior trend.

How to trade it

Entry (Rising Wedge): Short on a close below the lower trendline of the wedge, ideally with a volume spike confirming the breakdown.

Entry (Falling Wedge): Long on a close above the upper trendline of the wedge. Volume confirmation is important here as the breakout can be slow to develop.

Stop loss: Just inside the wedge beyond the most recent swing high (for Rising Wedge shorts) or swing low (for Falling Wedge longs).

Target: Project the widest part of the wedge (the opening) from the breakout point as the measured move.

What it is

A short-term consolidation after a sharp price move (the flagpole). The flag is a tight rectangular channel drifting mildly counter-trend — slightly downward in a bull flag, slightly upward in a bear flag. Volume drops during the flag and surges on the breakout.

How to trade it

Entry (Bull Flag): Long on a close above the upper channel trendline on above-average volume.

Entry (Bear Flag): Short on a close below the lower channel trendline with volume confirmation.

Stop loss: Below the flag low (bull flag) or above the flag high (bear flag).

Target: Length of the flagpole projected from the breakout point (measured move).

What they are

All three triangle types form as price makes a series of lower highs, higher lows, or both — compressing into an apex. An Ascending Triangle has a flat resistance line and a rising support line, biased bullish. A Descending Triangle has a flat support line and a falling resistance line, biased bearish. A Symmetrical Triangle has both lines converging toward a central point with no directional bias — the breakout direction determines the trade.

What they signal

Triangles represent a period of consolidation where supply and demand are reaching equilibrium. As price compresses into the apex, a breakout becomes inevitable. Ascending and Descending triangles have a directional bias based on their structure. Symmetrical triangles are neutral — trade whichever direction breaks first, ideally confirmed by a volume surge. All three can act as reversal or continuation patterns depending on the prior trend.

How to trade them

Entry: On a close outside the triangle boundary — above the resistance line for long entries, below the support line for short entries. Many traders wait for a retest of the broken trendline before entering.

Stop loss: Just inside the triangle, below the most recent higher low (for longs) or above the most recent lower high (for shorts). A close back inside the triangle typically invalidates the breakout.

Target: Measure the height of the triangle at its widest point (the base) and project that distance from the breakout point.

What it is

Popularised by William O’Neil, the Cup and Handle is a bullish continuation pattern that develops over weeks to months. Price forms a rounded, U-shaped base (the cup) after a prior uptrend, then makes a smaller, shallower pullback (the handle) before breaking out to new highs. The cup should be smooth and rounded — not V-shaped. The handle should retrace no more than 50% of the cup’s depth and form on declining volume.

What it signals

The cup represents a period of consolidation after a prior advance, during which weak hands are shaken out and a new base of support is built. The handle is a final shakeout before the breakout — volume declining during the handle confirms sellers are exhausted. A volume surge on the breakout above the cup’s resistance line (the “rim”) signals institutional buying and validates the pattern.

How to trade it

Entry: Long on a close above the rim of the cup (the resistance line connecting the two highs at the top of the cup) on above-average volume. Some traders enter during the handle on a small pullback to the rim, anticipating the breakout.

Stop loss: Below the low of the handle. A break below the handle low typically invalidates the pattern.

Target: Measure the depth of the cup (from the rim to the lowest point) and project that distance upward from the breakout point. Larger cups on higher timeframes tend to produce larger breakout moves.