Chart Patterns Cheat Sheet

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Chart Patterns Cheat Sheet

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One of altFINS’ unique strengths is the automated pattern recognition across 4 time intervals (15m, 1h, 4h, 1d).

But traders still need to be able to interpret the signals, manage their entry/exit points, stop loss levels, and even select those situations with the best chances of working.

To help you remember various chart patterns and what they are signaling, we’ve put together this cheat sheet.

There are historical tendencies which dictate whether a chart pattern is generally considered to be a continuation or reversal pattern.  However, always remember that “continuation or reversal” implies what the pattern is likely to do and not what it will do.  In other words, these patterns work about 70% of the time.  That’s a solid winning rate, but there will be many exceptions.

Continuation and reversal patterns in essence do exactly what their names imply. A continuation pattern forms and then breaks in the direction of the trend that it developed within. A reversal pattern breaks in the opposite direction of the trend it developed within.

The likelihood of continuation or reversal of a chart pattern in great part depends on the initial trend.  If the initial trend is strong, the likelihood of the signal accuracy is higher.

An example of how to read this table: “If a Rising Wedge forms in a Downtrend, it will likely break to the downside (i.e. continuation of trend), and if it forms in an Uptrend, it will also likely break to the downside (i.e. reverse the prior trend)”.  If the initial trend is strong, there’s a greater chance that these rules will apply.

Also important, notice that we distinguish between “emerging” and “breakout” (i.e. completed) patterns.  Emerging patterns have not broken out, hence, not completed.  Read more in our knowledge base.  These rules apply to completed patterns with breakouts.

 

 

Example: BNB (Binance Coin) formed an Ascending Triangle in an Uptrend, which typically resolves in a continuation of a trend => UP.  And it did with a big candle and big volume, followed by another close or two above the triangle’s resistance line.  Profit target is set using approximately the height of the triangle at the starting point.