How to Read Pattern Setups for Beginner Traders

The common patterns used to trade that beginner trades should know are explained below. These chart pattern are grouped into reversal chart patterns and continuation patterns.

Reversal Setups

The widely used reversal chart patterns are:

Double Top

Double tops chart pattern is an M shaped 2 tops or 2 peaks pattern formation that forms on the price chart during a upward trend.

Double tops setup is a bearish pattern that forms when price reaches and gets to a resistance level.

The price will move upward and then dip a little then turn up and move upward to the top level where it had reached or slightly below this level then move downward again forming what's known as a double tops chart setup.

Double Bottom

Double bottom setup is a W shaped 2 bottoms or 2 lows setup that forms on the price chart during a downwards trend.

Double bottom setup is a bullish pattern that forms when price reaches and gets to a support level.

The price will move downward in then move up a little then turn downwards & move downward to the bottom level where it had reached or slightly above this level then move up again forming what's known as a double bottom chart setup.

Head Shoulder Chart Setup

Head and Shoulders setup is a bearish reversal chart setup that forms after a upward trend.

There is an initial peak which is the first shoulder then a small dip in price, then the second higher peak which is the head then another price dip which is followed by last peak in price which is the second shoulder.

The lowest points between the 2 gold price lows forms the neckline & the reversal signal from this head and shoulders chart pattern is confirmed once price goes below this neckline.

Reverse Head Shoulder Chart Setup

Reverse Head and Shoulders pattern formation is a bullish reversal chart setup that forms after a downwards trend.

There's an initial dip that is the first reverse shoulder then a moderate peak in price, then a second lower trough which is the reverse head and then another price peak followed by last price dip in price which is the second inverse shoulder.

The highest points between the 2 gold price peaks forms the neckline and the reversal signal from this reverse head and shoulders chart pattern is confirmed once price goes above this neckline.

Continuation Patterns

Continuation patterns are:

Rising Wedge or Ascending Wedge

Rising wedge is a continuation pattern formation that forms during an upwards trend and this patterns looks like a triangle consolidation pattern that has an upward slope that is moving upward.

Rising wedge chart pattern has rising sloping support & resistance levels and this setup displays that prices keep moving higher & once prices move out of this rising wedge pattern the upward trend is likely to continue.

Falling Wedge or Descending Triangle

Falling wedge is a continuation setup that forms during a downwards trend and this patterns looks like a triangle consolidation pattern that has a descending slope that's heading downward.

Falling wedge chart pattern has descending sloping support & resistance levels and this setup displays that prices keep moving lower & once prices move out of this descending wedge pattern the downward trend is likely to continue.

Bullish Pennant or Bearish Flag

Bullish Flag is a setup with parallel support & resistance levels that forms during a upward trend & a continuation signal gets derived & generated when the price goes above bullish flag pattern & the upward trend continuation signal is derived & generated by continuation bullish flag pattern.

Bearish Pennant or Bearish Flag

Bearish Flag is a setup with parallel support & resistance levels that forms during a downward trend and a continuation signal gets derived & generated when the price goes below the bearish flag pattern & the downwards trend continuation signal is derived & generated by continuation bearish flag pattern.

How to Read Pattern Setups for Beginner Traders

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