If candlestick patterns are the words, chart patterns are the sentences. They show you the bigger picture — where the market has been, where it might be going, and where the key battlegrounds are between buyers and sellers. Here’s everything you need to know.
Trading involves risk. Binary options and forex trading involve substantial risk of losing your capital. This glossary is for educational purposes only. Never trade money you cannot afford to lose.
How to Use This Glossary
Each term includes a plain-English definition, a real trading example, and a link to a detailed guide. Patterns are grouped by type — support/resistance levels first, then reversal patterns, then continuation patterns.
Support and Resistance Levels
Support
Support is a price level where buying pressure is strong enough to prevent the price from falling further. Think of it as a floor — the market bounces off it. You identify support by looking for at least two to three price touches at a similar level. The more touches, the stronger the support (learn how to trade support and resistance →).
Example: EUR/USD touches 1.0850 three times in two hours on the 5-minute chart. Each touch produces a bounce. That’s your support level. If price breaks below it, support becomes resistance — a classic level swap.
Resistance
Resistance is the opposite of support — a price level where selling pressure stops the price from rising further. It’s the ceiling. Same rule applies: two to three touches confirm the level. When resistance breaks, it often becomes new support (Support and Resistance Explained →).
Trendline
A diagonal line drawn along consecutive higher lows (uptrend) or lower highs (downtrend) that shows the market’s direction. An uptrend line connects at least two higher lows — as long as price stays above it, the trend is intact. A break below the trendline warns that the trend might be ending. Trendlines are dynamic support and resistance (learn our trendline trading strategy →).
Example: On the 15-minute chart, draw a line under the last three higher lows of GBP/USD. Price stays above it for 2 hours — trend is up. When price finally breaks below, it’s your signal to stop buying and wait.
Reversal Patterns
Double Top
A bearish reversal pattern that forms after an uptrend. Price hits a high, pulls back, then tries again but fails to break above the first high — creating two peaks at roughly the same level. The pattern is confirmed when price breaks below the “neckline” (the low between the two peaks). Measured target: the distance from the peaks to the neckline, projected downward (learn our breakout strategy →).
Example: USD/JPY rallies to 149.50, pulls to 148.80, then rallies again to 149.45 before reversing. When price breaks below 148.80, the double top is confirmed. Target: 148.10.
Double Bottom
The bullish version of a double top. Price hits a low, bounces, then drops again to test the same low — and bounces again. Confirmed when price breaks above the neckline (the high between the two bottoms). A reliable bullish reversal pattern, especially on higher timeframes.
Head and Shoulders
One of the most reliable reversal patterns. Three peaks: a left shoulder (high), a higher head (higher high), and a right shoulder (lower high — fails to match the head). The “neckline” connects the lows of the two troughs. Breakdown below the neckline confirms the reversal. Head and shoulders at the top of an uptrend = bearish. An inverse head and shoulders at the bottom of a downtrend = bullish.
Example: After a 2-week rally, gold forms a head and shoulders on the 1-hour chart. The right shoulder fails to break above the left shoulder high. Price breaks below the neckline at $2,350 — target $2,310 (neckline minus head-to-neckline distance).
Continuation Patterns
Flag
A small consolidation pattern after a sharp price move. The flag looks like a small rectangle sloping against the trend — a brief pause before the trend continues. The “flagpole” is the sharp move, and the “flag” is the consolidation. Trade the breakout in the direction of the original move.
Channel
Price moves between two parallel trendlines — an upward channel (higher highs and higher lows), downward channel (lower highs and lower lows), or horizontal channel (range-bound). Channels help you trade both directions: buy at support, sell at resistance, as long as the boundaries hold. A breakout from the channel signals a potential acceleration (learn to trade channels →).
Example: BTC/USD has been trading in a downward channel between $58,000 and $62,000 for 3 days on the 15-minute chart. You sell at the upper boundary ($62,000) and buy at the lower boundary ($58,000) until the channel breaks.
Chart Patterns Cheat Sheet
Common Confusions
Support vs Resistance — Support is the floor; resistance is the ceiling. When price breaks support, that level often becomes new resistance (and vice versa). They swap roles constantly.
Double Top vs Head and Shoulders — Both are bearish reversals, but a head and shoulders has a higher middle peak, making it a stronger pattern. Double tops fail more often than head and shoulders patterns.
Next Steps
Now that you understand chart patterns, here’s what to learn next:
Support and Resistance Strategy → — Apply chart patterns in a complete trading strategy.
Candlestick Patterns Glossary → — Learn the individual candles that form these patterns.
Breakout Trading Strategy → — Catch moves when price breaks through key levels.
Trading involves substantial risk of losing your capital. This glossary is for educational purposes only. Past performance does not guarantee future results. Always do your own research before trading.
Was this glossary helpful?