Simple Chart Patterns Every Beginner Should Recognize

Beginner’s Guide: Post 16
Alright, let’s keep going. In our last guide, we learned to identify the market’s key ‘battlegrounds’—support and resistance levels. You’re learning to read the map. Now, it’s time to learn how to read the formations the armies make before they attack.

These formations are called chart patterns.

Think of them as visual “footprints” or “road signs” left behind by the constant battle between buyers and sellers. They are recognizable shapes that price makes as it moves over time. And the reason we care? Because these specific shapes often hint at the market’s next probable move. Learning to spot a few of the most common chart patterns is a huge step in your technical analysis journey.

Learning Objective: After this chapter, you will be able to identify four of the most common and reliable chart patterns and understand the basic framework for how traders use them to form a trading thesis.

What You’ll Learn:

• The crucial difference between continuation and reversal chart patterns.
• How to spot four essential patterns: Flags, Double Bottoms/Tops, and Ascending Triangles.
• The market psychology that creates each of these formations.
• A simple “If-Then” framework for trading each pattern.

Estimated Time to Complete: 25 minutes
Prerequisites: Introduction to Technical Analysis: Finding Support & Resistance Levels

The Big Disclaimer: Patterns Are About Probability, Not Prophecy

Before we look at a single shape, we need to have a serious talk. This is the part most gurus on social media conveniently forget to mention.

Chart Patterns are NOT Guarantees

Let us say this as clearly as we can: Chart patterns do not predict the future. They are not crystal balls. They do not guarantee a stock will go up or down. If anyone tells you a pattern is a “sure thing,” you should run in the other direction.

Why We Use Them: To Find an “Edge”

So if they aren’t guarantees, why bother? Because trading is a game of probabilities. We use chart patterns to find situations where the odds might be slightly in our favor. A well-formed pattern, in the right context, can give us a statistical “edge”—a reason to believe one outcome is more likely than another.

The Goal: Use Patterns as One Piece of Evidence in Your Trading Plan

The pattern is just one clue. It’s not the whole story. A professional trader combines a chart pattern with other factors—like support and resistance, volume, and the overall market trend—before ever considering a trade. Your goal is to learn these patterns so you can incorporate them as just one component of your written trading plan.

The Two Main Families of Patterns: Continuation vs. Reversal

Almost all chart patterns fall into one of two simple categories. Understanding this distinction is your first step to reading them correctly.

Continuation Patterns: The Market “Catching Its Breath”

A continuation pattern suggests that after a brief pause, the prevailing trend is likely to resume. Imagine a runner in a marathon. They don’t sprint the entire 26.2 miles; they run for a bit, then might slow down to a jog to catch their breath before continuing on. Continuation patterns are the market “jogging” for a bit before the next sprint.

Reversal Patterns: Spotting a Potential “Change in Character”

A reversal pattern, as the name implies, suggests that the current trend is losing steam and may be about to change direction. Think of a car trying to drive up a steep, icy hill. The engine revs, the wheels spin, but it stops making progress and starts to slide back down. Reversal patterns are the visual cues of the trend’s engine sputtering out. For a deeper look, check out our reversal trading playbook.

The “Beginner’s Focus Group”: 4 Simple Patterns to Master First

There are dozens and dozens of named chart patterns out there, from “gartleys” to “butterflies.” Trying to learn them all at once is a classic beginner mistake that leads to “analysis paralysis.”

So, our team is going to do you a favor. We’re intentionally focusing on just four of the most common stock chart patterns that are relatively easy to spot and have straightforward logic. Master these first. Build your confidence. You can always learn the more exotic ones later.

Pattern #1: Flags & Pennants (The Classic Continuation Play)

This is one of the most reliable simple chart patterns for beginners.

What They Look Like: A Sharp “Flagpole” Followed by a Tight Consolidation

A flag pattern forms after a very sharp, almost vertical price move (this is the “flagpole”). Following this explosion, the price consolidates in a tight, rectangular channel that slopes slightly against the prevailing trend. It looks like, well, a flag on a pole. A pennant is similar, but the consolidation is a small, symmetrical triangle instead of a rectangle.

The Psychology: A Brief, Orderly Pause After an Explosive Move

The flagpole represents a burst of aggressive buying or selling. The flag itself is a period of quiet profit-taking. The initial buyers aren’t dumping their shares; they’re just taking a breather. The fact that the price doesn’t give back a significant portion of the flagpole’s gain shows that the underlying strength is still there.

A Simple “If-Then” Trading Framework

• IF price breaks out of the top (for a bull flag) or bottom (for a bear flag) of the consolidation channel…
• THEN I will consider an entry in the direction of the original trend.
• Stop-Loss: A logical stop goes just below the low of the flag (for a bull flag) or above the high (for a bear flag).
• Profit Target: A common technique is to measure the height of the flagpole and project that distance from the breakout point (called a “measured move”).

Real Trade Example: A Bull Flag in Advanced Micro Devices (AMD)

Let’s look at a real example. After a strong earnings report in late July 2025, AMD stock exploded from around $160 to a peak of $192. This big, sharp rally formed our flagpole. For the next five days, the stock consolidated in a tight, downward-sloping channel—a perfect bull flag. On August 8, 2025, AMD broke out of the top of this flag on high volume, signaling a continuation of the uptrend and ultimately pushing towards $200.

Pattern #2: The Double Bottom (The “W” Reversal)

This is a classic reversal pattern that signals a potential shift from a downtrend to an uptrend.

What It Looks Like: Two Distinct Lows at the Same Support Level

The pattern looks like the letter “W”. The price is in a downtrend, it hits a low, bounces, sells off again, but finds support at or near the same level as the first low. It fails to make a new low.

The Psychology: Sellers Try to Break Support Twice and Fail, Showing Exhaustion

The first low and bounce are normal. The key is the second test. When sellers push the price back down but can’t break that previous low, it’s a huge sign. It tells us that selling pressure is drying up, and buyers are now willing to step in and defend that price level. The sellers’ failure gives buyers the confidence to take control.

A Simple “If-Then” Trading Framework

• IF price confirms the pattern by breaking out above the neckline (the peak of the bounce between the two bottoms)…
• THEN I will consider a long entry.
• Stop-Loss: A logical stop is placed just below the twin lows of the “W”.
• Profit Target: A measured move target is found by taking the height from the lows to the neckline and projecting that distance up from the breakout point.

Real Trade Example: A Reversal in Regional Banks (KRE)

In early 2025, the regional banking sector was in a clear downtrend. The SPDR S&P Regional Banking ETF (KRE) hit a low around $44.00 in March and bounced to $47.50 (our neckline). It then sold off again in early April, but buyers stepped in aggressively right at that same $44.00 support level, forming a classic Double Bottom. On April 18, 2025, KRE broke decisively above the $47.50 neckline, confirming the reversal and starting a new, sustained uptrend.

Pattern #3: The Double Top (The “M” Reversal)

You guessed it—this is the bearish twin of the double bottom.

What It Looks Like: The Mirror Image of a Double Bottom

This pattern looks like the letter “M”. Price rallies to a resistance level, pulls back, and then rallies again but fails to break above that same resistance level.

The Psychology: Buyers Can’t Break Resistance… Twice

The second failure to make a new high is a sign of buyer exhaustion. It shows that despite a second attempt, there wasn’t enough buying power to push through the sellers waiting at that resistance level. This failure can spook the bulls and embolden the bears, often leading to a sharp sell-off. For a detailed guide on playing the downside, see our team’s short-selling breakdown strategy.

Pattern #4: The Ascending Triangle (A Bullish Coil)

This is a great continuation pattern that shows a clear story of building pressure.

What It Looks Like: A Flat Horizontal Resistance and a Rising Trendline of Higher Lows

Imagine a horizontal line representing a clear resistance level that the stock just can’t seem to break. Now, from below, imagine a rising trendline as the stock makes a series of higher lows—each dip is bought up more quickly than the last. The price gets squeezed, or coiled, between these two lines.

The Psychology: Buyers are Becoming More Aggressive Than Sellers

The flat resistance line shows that sellers are present at that price. However, the rising trendline of higher lows is the key. It tells us that buyers are getting impatient and more aggressive, stepping in at progressively higher prices. This coiling action builds up energy, and often, the buyers eventually overwhelm the sellers, leading to an upward breakout.

A Simple “If-Then” Trading Framework

• IF price breaks out decisively above the flat resistance line…
• THEN I will consider a long entry.
• Stop-Loss: Place the stop below the most recent swing low inside the triangle.
• Profit Target: Measure the widest part of the triangle (at the beginning) and project that height from the breakout point.

While learning to spot these manually is a crucial skill, our team knows it can be tough to train your eyes. This is where a tool can help. Platforms like TrendSpider have automated pattern recognition that can scan the market and highlight formations like triangles directly on your chart, which is a fantastic learning aid.

The Golden Rule: Context and Confirmation Are King

Seeing one of these shapes is not enough. To trade chart patterns effectively, you need two more things.

Context Matters: Look for Patterns at Key S/R Levels

A double bottom that forms at a major, multi-month support level is infinitely more powerful than one that appears randomly in the middle of a price range. The pattern confirms the significance of the level, and the level reinforces the validity of the pattern. Always look for your patterns at or near pre-identified support and resistance zones.

Confirmation Matters: Why Volume on the Breakout is Your “Truth Detector”

A breakout from a pattern on weak, anemic volume is suspicious. It’s a major red flag for a potential “fakeout.” What you want to see is a surge in volume as the price breaks out of the pattern. This tells you there is real conviction and participation behind the move, making it much more likely to succeed. Always check the volume bars on your breakout candle! For more on this, our team has a detailed breakout vs. fakeout checklist.

Summary & Key Takeaways

• Chart patterns are visual representations of market psychology, not foolproof crystal balls.
• They fall into two main camps: Continuation (suggesting a trend will resume) and Reversal (suggesting a trend may change).
• As a beginner, focus on mastering a few simple patterns first: Flags, Double Tops/Bottoms, and Ascending Triangles.
• Always analyze a pattern’s psychology to understand the story it’s telling about buyers and sellers.
• The two most important factors for validating a pattern are Context (does it form at a key S/R level?) and Confirmation (is there a volume surge on the breakout?).

Frequently Asked Questions (FAQ)

Next Step: Adding Mathematical Tools

You’re now learning to read the ‘shapes’ of price action, which is a massive step. Many traders like to combine this visual analysis with mathematical tools for extra confirmation. Let’s get a simple introduction to the world of technical indicators.

Ready to add another tool to your kit? Let’s go: Chapter 17: Introduction to Basic Indicators (Keep it Simple!)