41 Powerful Chart Patterns Every Trader Needs in 2025

Chart pattern analysis can be applied to any chart type, including but not limited to candlestick, point-and-figure, bar charts, or even charts built on fundamental data. The fractal nature of technical analysis means that chart patterns can also be found in different time frames. Chart patterns can form on time frames as low as a one-minute chart, all the way to patterns that may take years to develop.

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How to Trade Using Chart Patterns

Traders may use technical indicators like the Relative Strength Index (RSI) or Moving Average Convergence Divergence (MACD) to further confirm the reversal. There are three main types of chart patterns in technical analysis of the stock market – continuation patterns, reversal patterns, and bilateral patterns. Complex patterns like cup and handle, inverse cup and handle, saucer, diamond top, and diamond bottom require more time to form but can offer powerful signals.

Bullish Flag Pattern

In this blog we will explore what chart formations are, how they work and some common examples or patterns. Broadening Formations are not popular patterns because they are complex and difficult to understand. Many traders are familiar with more commonly recognized patterns like triangles or channels, so they may not recognize a broadening formation when it appears on a chart.

The psychology behind this pattern relates to the steady buying pressure required to sustain a series of higher highs and lows. As buyers gradually gain control, each successive peak reflects their increased optimism and willingness to pay higher prices. The orderly, step-like rises reveal sustained positive sentiment rather than unsustainable Vertical spikes. The ascending staircase pattern is a bullish chart pattern that resembles a staircase, with higher highs and higher lows. A chart formation patterns support structure is present below, a double bottom and a break of structure generates a trade opportunity for the long side as the gap is expected to be filled.

For traders who spot this pattern, the typical entry would be after the second retracement on confirmation of the upturn. Initial profit targets are set near previous resistance levels or at the height of the drives. Traders exit either when profit targets are hit or if the new trend fails and the price drops below the stop loss. With each breakdown, it creates resistance levels that resemble a staircase. Price is expected to retest this stair and continue its trajectory towards downside.

Lastly, Broadening Formations are identified on a chart by a series of higher pivot highs and lower pivot lows, providing valuable signals for technical analysis traders seeking to capitalize on price action. Broadening Formations typically occur after a significant rise or fall in security prices. This is when the price range increases and expands from its previous highs and lows, creating two diverging trend lines — one rising and one falling. Broadening formations indicate increased market volatility, which can help traders anticipate future market moves. Broadening Formation patterns tend to appear in both bull and bear markets, providing valuable insights into the direction of current market trends which can help traders inform their trading decisions. Additionally, Broadening Formations can provide insight into potential changes in trend direction when these patterns appear after a prolonged period of price action within a range-bound market.

The psychology is that after a steep drop, short sellers take profits driving a normal pullback and consolidation. Decreasing volume and volatility reflect a stabilizing period where supply and demand momentarily balance out. The triangular shape shows indecision as both bulls and bears hesitate during the pause.

What Do Chart Patterns Mean?

This pattern signifies a pause in the trend, where buyers and sellers are in equilibrium.
These patterns leverage a wide variety of shapes to deliver insights into the potential price movements.
Post-spike, the expectation is for the market to continue its prior direction.
Therefore, technical analysis should be used along with proper money management.
The formation of this pattern gives rise to the possibility of a trend flip from the previous lower low, which will probably become the first higher low.
The pattern is considered more reliable when it occurs after a significant trend, as this suggests that the market has been moving in one direction for an extended period and is now vulnerable to a reversal.

The effectiveness of chart patterns varies, with some patterns showing higher success rates than others in specific market conditions. However, traders should combine chart pattern analysis with other forms of technical and fundamental analysis to increase their chances of success and make more informed trading decisions. Chart patterns are geometric shapes drawn onto price charts that can help traders understand price action, as well as make projections about where the price is likely to go (. e.g., price breakouts and trend reversals).

These formations can be described as a series of higher highs and lower lows, which create a widening pattern on the price chart.
This trading pattern typically appears at the peak of an uptrend and indicates that the trend is losing momentum, with sellers starting to dominate.
The stop loss placement aligns with the market structure defined by the chart pattern, balancing protection with room for the trade to develop.
However, one from the lower trendline signifies the beginning of a new downward trend, while a breakout from the upper trendline marks the start of a new upward trend.
A triple bottom pattern forms when a security’s price tests a support level three times, creating three distinct low points at roughly the same price level, before breaking out above resistance.

Symmetrical Triangles

Many traders recommend waiting for breakouts or additional technical indicator confirmation before acting on chart pattern signals to improve accuracy. Once the pattern is confirmed, traders often use the range of the neckline to project a target price for the downward move. The vertical distance between the tops and the neckline can help estimate how far the price might fall. Finally, after breaking below the neckline, there is often a retest of this level. The chart notes this retest as confirming the trend reversal towards a downside, solidifying confidence in the new downtrend direction. Certain candlestick patterns provide clues about prevailing market psychology and potential trend changes.

Why Broadening Formations Are Important For Technical Analysis

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Once it breaks, the power of buyers is lost, and sellers start to accelerate their selling positions. Aggressive and risky traders often take short trades at the close of the breakdown candle and risk-averse traders will wait for a retest of this broken neckline on lower time frames and find entry models. The range between the neckline and head is taken as the potential target range when the price finally breaks down of the neckline.

Descending Triangle Chart Pattern

The megaphone pattern consists of sequentially higher peaks and lower troughs that continue diverging outward, resembling the flared end of a megaphone or cone on the price chart. This indicates increasing price volatility as the range between highs and lows widens over time. Spike patterns refer to short-term, sudden price movements with unusually high trading volume and volatility that stand out dramatically on the price chart. A recent study by Johnson (2023) titled “Reversal Patterns in Volatile Markets,” conducted by the Institute of Market Analysis, found that diamond tops have a 69% success rate in predicting trend reversals. For bullish island reversals, as in the example above, it consists of a gap down followed by a consolidation known as an island.

Although the ATR was initially designed to be used for commodity trading, it can also be used for trading other instruments, such as stocks, Forex, and cryptocurrencies, etc. …