Price patterns—also known as chart formations or chart patterns—are recurring price structures used in technical analysis to interpret potential future market movements.
They are generally divided into continuation patterns (e.g. flags, pennants, triangles) and reversal patterns (e.g. double top, double bottom, head and shoulders).
The interpretation is based on the assumption that certain formations tend to trigger similar market reactions repeatedly, as many participants recognize and act on the same patterns.
Price patterns are rarely traded in isolation. They are usually combined with other signals such as volume, technical indicators, or the overall trend direction.
The reliability of individual patterns varies significantly depending on market conditions and timeframe. In algorithmic trading, price patterns are increasingly identified automatically and integrated into systematic trading strategies.
