Chart pattern

Chart patterns are recurring geometric shapes formed by price action over time on a financial chart. These formations, such as triangles, head and shoulders, or flags, are interpreted by technical analysts to signal potential continuations or reversals of existing price trends. Their recognition relies on historical observation of how markets reacted to similar structures.

For a retail trader, identifying chart patterns can offer potential entry or exit points for trades. However, pattern recognition is subjective and not always accurate, leading to false signals. Relying solely on patterns without other confirmation, like volume or fundamental analysis, can result in frequent losses and inefficient capital use.