Chart patterns are the language of price. Learn to read them and you’ll see structure where others see noise. The best way to expand your toolkit is by mastering trading definitions, seeing concise examples in forex pairs, and being able to locate the most practical entry/exit points so your forex pattern trading becomes rules-based rather than guesswork.
The following information is provided solely for educational purposes and does not constitute personal advice or a recommendation to trade margin FX/CFDs.
What are forex chart patterns?
Forex chart patterns are a graphical representation of currency pair prices. They depict the historical and current prices of the currency pair to help you analyze potential future price movements. Through these charts, you’ll be able to identify potential entry and exit points, as well as analyze the duration of trends and when trends may come to an end.
Think of them as recurring shapes formed by price action that offer context and probabilities, helping you anticipate what might come next – continuation, pause, or reversal. They don’t predict the future, but they provide valuable context that may inform decision-making. In fast-moving forex markets, patterns help you:
- Spot likely entries (breakouts, retests, pullbacks).
- Place logical stop-losses (beyond structure/volatility).
- Set realistic profit targets (measured move, range width).
- Filter trades (trade with – not against – the dominant trend).
Forex chart patterns can be categorised into three useful buckets:
- Continuation: Trend pauses then resumes (e.g. flags, pennants, triangles).
- Reversal: Trend weakens then turns (e.g. head and shoulders, double tops/bottoms).
- Bilateral: Can break either way (e.g. symmetrical triangles, diamonds).
Top forex chart patterns you should know
1. Candlestick chart pattern (family)
The candlestick chart pattern in forex can help analyze potential market movement of the currency pair. It consists of the opening price, closing price, high price, and low price of the currency pair and helps traders identify whether the market is moving in an upward or downward direction.
- When a candlestick pattern indicates a downward movement, it’s a signal to consider exiting the trade to manage potential risks.
- When a candlestick pattern indicates an upward movement, it’s a signal to consider entering the trade when the pattern suggests a potential upward movement.
Signal: Potential reversal or continuation depending on the formation (e.g., pin bars, engulfing, inside bars).
Forex example: EUR/USD forms a bullish engulfing after a three-day sell-off near prior support, suggesting a potential reversal.
How to trade: Use the candle as a trigger when it aligns with the trend or level, and always consider risk management. Place stops beyond the wick or pattern low/high, taking into account market conditions and volatility.
2. Double top and double bottom
The double bottom double top chart pattern indicates potential trend reversals. They consist of either two high prices (double top) or two low prices (double bottom) of the currency pair. It’s less likely for a currency pair to move beyond the high price point or below the low price point after it does so twice on different occasions, but market conditions vary.
- Whenever a currency pair price reaches an all-time high price twice, it sends a signal of a downward market movement thereafter. Exiting the current position can minimize losses.
- Whenever a currency pair price reaches an all-time low price twice, it sends a signal of an upward market movement thereafter. Theoretically, this indicates a sell position in the current market.
Signal: Reversal.
Forex example: GBP/USD forms two peaks near 1.3100 with a neckline at 1.2950. Breakdown confirms bearishness.
How to trade: Enter on a neckline break or after a pullback. Your target should be equal to the height from the neckline to the peak/bottom.
3. Head and shoulders
The head and shoulders chart patterns are used to predict a downward market situation. They can help you analyze how much the price of the currency pair is going to fall and in what intervals. This, in turn, leads you to make an exit choice to minimize potential losses. There generally exist two price highs before and after a significant price high, indicating falling prices thereafter.
Signal: Bearish reversal.
Forex example: AUD/USD rallies into a left shoulder–head–right shoulder around major resistance. The neckline break starts a down-leg.
How to trade: Enter on a neckline break or retest. Your target should be around the head-to-neckline distance.
4. Inverse head and shoulder
The inverse head and shoulder chart patterns are used to predict an upward movement. This chart pattern can help you predict how much the price of a currency pair is going to rise in the future and in what intervals. This can help when making entry decisions in the market to maximize your profits. There are generally two price lows before and after a significant price low in the chart pattern, after which there is a surety of a market rise.
Signal: Bullish reversal.
Forex example: USD/JPY builds an inverse head-and-shoulders at a weekly pivot. Breakout above the neckline kicks off the resumption of the trend.
How to trade: Use the same logic as with head and shoulders, but reversed.
5. Rising and falling wedges
The rising and falling wedges chart pattern indicates market breakouts. It consists of a price range that becomes too narrow and results in a final breakout that marks a trend reversal.
- Rising wedges are chart patterns that occur due to an upward price consolidation. This is followed by a sharp price fall and is a bear signal to exit the market as soon as possible.
- Falling wedges are chart patterns that occur due to downward price consolidation. This is followed by a sharp price rise and is a bull signal to exit the market as soon as possible.
Signal: Usually reversal (rising = bearish, falling = bullish). Sometimes continuation.
Forex example: EUR/GBP grinds up in a narrowing rising wedge, with a breakdown triggering mean-reversion.
How to trade: Wait for a decisive breakout of the wedge. Your target should be the start of the wedge or local structure.
6. Hammer and inverted hammer (candlesticks)
The hammer chart pattern is part of candlestick patterns. However, this particular chart is solely dedicated to identifying the lowest low in the currency pair price. It can help you identify a market trend reversal at the lowest low point, which will enable you to make market entry decisions that are profitable.
On the other hand, the inverted hammer chart pattern helps in identifying the highest high price of a currency pair. This can help you identify a downward trend reversal, sending you exit signals in the forex market to minimise losses.
Signal: Hammer = bullish reversal. An inverted hammer tends to warn of selling from higher levels (with confirmation).
Forex example: NZD/USD hammers at daily support after CPI shock. Buyers defend lows.
How to trade: Demand confirmation (close above hammer’s high/follow-through).
7. Butterfly (harmonic)
The butterfly chart pattern helps identify market reversals well before time. This means you can make significant trade decisions with respect to entry and exit prices. It starts from either a high price of a currency pair, followed by a low swing (or vice versa). Often, the butterfly pattern also looks like “M” in a bullish market and “W” in a bearish market, signaling multiple trend reversals.
- When an upward market trend reversal occurs, it’s a sign to buy more of the currency pair to lock in additional profits.
- When there is a downward market trend reversal, it’s a sign to sell more of the currency pair to protect yourself against losses.
Signal: Reversal at specific Fibonacci legs.
Forex example: EUR/JPY completes a bearish butterfly near the prior weekly swing high.
How to trade: Enter on potential reversal zone (PRZ) confirmation.
8. Engulfing (candlestick)
The engulfing chart pattern is used to identify entry and exit points. During an uptrend, it’s advised to place entry orders right above the high currency pair price, and during a downtrend it’s best to pace exit orders right below the low currency pair price. These patterns also signal trend reversals that help traders enter or exit the market accordingly.
- You can identify a bullish engulfing pattern right after a downtrend whenever the candle moves beyond the currency pair prices of the previous day.
- You can identify a bearish engulfing pattern right after an uptrend whenever the candle moves below the currency pair prices of the previous day.
Signal: Reversal (bullish/bearish).
Forex example: USD/CHF prints a bearish engulfing straight into resistance. Follow-through is lower for the next session.
How to trade: Enter on pattern close or retest. You’ll want to manage risk behind the engulfing candle.
9. Shooting star (candlestick)
The shooting star chart pattern is formed whenever a currency pair price opens at a high, continues to trade at a higher price and then comes back down to close near the price where it opened. This pattern indicates that the currency pair prices can start falling anytime and send market trend reversal signals. The reversal signal suggests exiting the market at the highest price point to maximize your returns.
- Traders are advised to short the stock immediately if the currency pair prices decline during the day.
- Traders can place a buy order for the short-term during the continuous increase in the currency pair price during the day, but exit the trade before the market closes.
Signal: Bearish reversal.
Forex example: GBP/JPY prints a shooting star at weekly resistance after an extended rally.
How to trade: Seek confirmation (close below the middle of the candle). Stops should be set above the wick.
10. Triangles (ascending, descending, symmetrical)
The triangle chart pattern is used to signal a continuous existing trend. This means that whenever a triangle chart appears in the market, it’s a signal to continue buying during an uptrend and sell the currency pair during a downtrend. Two trend lines that converge are drawn from one single point to draw the triangle, indicating that the currency pair price first moves sideways and then continues in the same direction. There are three main triangles to look for in a forex chart pattern:
- An ascending triangle indicates a bullish continued pattern, signifying that the market is going to continue in the uptrend, and you can buy more of the currency pair.
- A descending triangle indicates a bearish continued market pattern signifying that the forex market is going to continue in the downtrend, and you should sell the currency pair to avoid losses.
- Symmetrical triangles are either bullish or bearish in nature. They form whenever the prices converge with the lows and highs, indicating either bearish or bullish trends.
Signal: Continuation. Bilateral for symmetrical.
Forex example: EUR/USD consolidates in an ascending triangle. Breakout above horizontal resistance continues the uptrend.
How to trade: Trade the break and retest. Set your target for the height of the triangle at its base.
11. Cup and handle
The cup and handle chart pattern is used to identify the price points to go long or enter the market. It shows a bearish market movement, which soon converts into a bullish trend. The cup is that of a “U” shape, followed by prices that trade close to each other, making its handle. When the pattern exists in the market for a few months, it indicates a strong bullish trend for the currency pair.
Signal: Bullish continuation.
Forex example: XAU/USD forms a rounded base (cup) and a shallow pullback (handle) before clearing resistance.
How to trade: Enter on the break of the handle high. Your target should be around the depth of the cup from its rim.
12. Doji (candlestick family)
Doji chart patterns include the opening and closing prices of the currency pair very close to each other. They send an indecisive signal to the market with a prediction of a trend reversal in the future.
- If there is an upward market movement through a Doji candlestick pattern, it can lead to the market reversing to a downward sentiment.
- If there is a downward market movement through a Doji candlestick pattern, it can lead to the market reversing to an upward sentiment.
Signal: Indecision. Potential for reversal/continuation depending on context.
Forex example: AUD/USD prints a long-legged Doji at daily resistance. The next day, it closes lower (bearish tilt).
How to trade: Wait for the candle after the Doji to set direction.
13. Pennants
The pennant chart pattern indicates continuation. In this pattern, the currency pair prices witness significant downward or upward movements followed by smaller upward or downward movements later.
- When there is a bull pennant, it’s a signal to enter the market since the market continues with the uptrend, leading to profits.
- When there is a bear pennant, it’s a signal to exit the market since the market continues with the downtrend, leading to losses.
Signal: Continuation after a sharp move (bull/bear).
Forex example: USD/CAD spikes on data, consolidates in a small pennant and then continues in the same direction.
How to trade: Enter on the break of the pennant boundary.
14. Bullish rectangle
The bullish rectangle chart pattern occurs due to a pause in the increasing currency pair prices. It’s a continuous trend where the prices have a non-volatile support and resistance level that helps the price break out after trading at the same level.
During the bullish phase, the prices keep increasing and form the bullish rectangle chart pattern that sends a signal to enter the trade and buy more of the currency pair to maximise your profits.
- Only enter the trade when the price either crosses the resistance level or goes below the support level.
- Place take-profit orders equal to the distance between the support price and resistance price.
- Place the stop-loss orders either above the resistance price or below the support price.
Signal: Continuation up after range consolidation.
Forex example: EUR/USD ranges between 1.0850–1.0950. An upside break resumes the trend.
How to trade: Buy the break or buy the retest.
15. Bearish rectangle
The bearish rectangle chart pattern occurs due to a pause in falling currency pair prices in the forex market. The continuous trend includes a non-volatile change in the support and resistance levels of the currency pair. These levels help the pair to break out in the later stages after trading at the same level for some time.
During the bearish phase, prices keep on decreasing and form the bearish rectangle chart pattern that sends a signal to exit the trade and sell more of the currency pair as soon as possible to minimize your losses.
- Exit the trade when the currency pair price is right above the resistance level.
- During a downtrend, place the stop-loss order right above the resistance price.
Signal: Continuation down after range consolidation.
Forex example: AUD/USD stalls at 0.6500–0.6400. A downside break extends the decline.
How to trade: Sell break/failed retest.
16. Flags (bullish and bearish)
Flags are swift “pause” formations after a strong impulse. Price drifts in a tight counter-trend channel before breaking with momentum. You can expect quick consolidation and a clean structure, with measured targets based on the flagpole.
Signal: Continuation (short, tidy channel against the prior impulse).
Forex example: GBP/USD surges 200 pips, then drifts lower 40–60 pips in a tight channel (bull flag) before breaking higher.
How to trade: Trade the breakout in the direction of the prior move.
17. Triple top and triple bottom
Three failed pushes at the same level can signal exhaustion. This pattern builds a clear neckline, and a decisive break hints at reversal. Expect slower formation and patient confirmation.
Signal: Reversal after three failed pushes.
Forex example: USD/JPY fails three times at 162.00. A neckline break confirms lower.
How to trade: Enter on a neckline break. Conservative traders might want to wait for a retest.
18. Channels (ascending/descending)
Channels map orderly trends with parallel boundaries. The price wavers between support and resistance until a breakout ends the rhythm. Trade bounces while the channel holds or the first break when there’s a shift in trend strength.
Signal: Continuation until the channel breaks. Breaks can also signal early reversals.
Forex example: EUR/GBP trends lower in a descending channel. If it touches the top line, there’s a short opportunity.
How to trade: Trade bounces within the channel or the breakout. Set stops beyond the channel line.
19. Morning star and evening star (candlestick trio)
These three-candle formations signal a momentum handover. After a strong move, indecision appears, then an opposite-colored confirmation candle. They’re classic reversal cues and are stronger at key levels and with supportive momentum.
Signal: Morning = bullish reversal. Evening = bearish reversal.
Forex example: NZD/USD prints Morning Star over three sessions at multi-week support.
How to trade: Enter after the third candle closes. Set stops beyond the pattern low/high.
20. Inside bar (IB) and outside bar (OB)
Inside bars show compression – the range is contained within the prior candle, usually preceding breakouts. Outside bars show expansion – engulfing the prior range – and flag volatility shifts. Bear in mind that location matters here, so trade them at meaningful support or resistance.
Signal: IB = contraction (breakout setup). OB = range expansion (usually reversal/continuation).
Forex example: XAU/USD prints an inside bar cluster under resistance. A break resolves the direction.
How to trade: Place stop orders beyond the IB range. For OB, trade with confirmation only.
21. Rounding bottom/saucer
A slow, curved base that reflects accumulation and fading supply. The turn is gradual, with breakouts being meaningful and trends persisting. Treat the neckline like resistance – confirmation will improve your follow-through odds.
Signal: Gradual bullish reversal.
Forex example: EUR/USD grinds sideways-up for weeks, printing a rounded base and then clears resistance.
How to trade: Enter on a neckline break. Your target should be approximately equal to the depth of the base.
22. Diamond top/bottom
A broadening swing that narrows into symmetry, compressing volatility before release. It’s bilateral, so direction is confirmed only on a breakout. Moves can be sharp, so define your risk beyond the opposite boundary.
Signal: Reversal. A bilateral build that resolves into a directional break.
Forex example: USD/CHF forms a diamond top after an extended rally. Downside break leads to a swift move.
How to trade: Trade the break with a stop-loss order on the other side of the pattern.
23. Three methods (rising/falling)
A strong trend candle followed by a controlled cluster of small counter-trend candles, then a decisive continuation candle. This pattern showcases orderly digestion, not rejection – great for add-ons or confirmation of a trend’s persistence.
Signal: Continuation candlestick pattern showing controlled pullback within a trend.
Forex example: USD/CAD shows rising three methods mid-trend. A break of the pattern high continues the move.
How to trade: Buy/sell the break of the “control” candle. Set your stops beyond the opposite side of the pattern.
Forex chart patterns cheat sheet
|
Pattern |
Type |
Main signal |
Usual entry |
Stop idea |
Measured target |
|
Candlesticks (engulfing, pin) |
Reversal/continuation |
Momentum shift at level |
Close/confirmation |
Beyond wick/pattern |
Nearest swing |
|
Double top/bottom |
Reversal |
Neckline break |
Neckline break/retest |
Beyond opposite swing |
Range height |
|
Head and shoulders/inverse |
Reversal |
Neckline break |
Break/retest |
Past shoulder/head |
Head to neckline |
|
Wedges (rising/falling) |
Reversal/continuation |
Break of wedge line |
Break/retest |
Beyond wedge line |
Start of wedge |
|
Flags/pennants |
Continuation |
Break with pole context |
Break/retest |
Across flag/pennant |
Pole height |
|
Triangles |
Continuation/bilateral |
Break of boundary |
Break/retest |
Opposite side |
Base height |
|
Rectangles (bull/bear) |
Continuation |
Range break |
Range break |
Other side of range |
Range height |
|
Cup and handle |
Continuation |
Break of handle high |
Break/retest |
Below handle low |
Cup depth |
|
Doji |
Reversal (context) |
Next candle direction |
Post-Doji close |
Past Doji extreme |
Local swing |
|
Channels |
Continuation/reversal |
Bounce or break |
Touch/break |
Outside channel |
Range/structure |
|
Triple top/bottom |
Reversal |
Neckline break |
Break/retest |
Beyond last swing |
Range height |
|
Rounding bottom |
Reversal |
Neckline break |
Break/retest |
Below base |
Base depth |
|
Harmonics |
Reversal |
PRZ reaction |
Confirmation in PRZ |
Beyond PRZ |
To prior structure |
How to trade forex chart patterns effectively
- Start with context: Trade with the higher-timeframe trend. A symmetrical triangle inside a strong daily uptrend has different odds than one under a weekly supply zone.
- Confirm intelligently: If you don’t have real volume, use momentum proxies (e.g. RSI crossing 50, MACD turns, range expansion on breakout).
- Choose entries that match you:
- Breakout close: Simple, but can be late.
- Break-and-retest: Patient and usually better R:R.
- Pullback to moving average/level: Great in continuation patterns after the first impulse. -
Put stops where the pattern is wrong: That should include both structure stops (beyond the opposite side of the pattern) and volatility stops. Don’t set stops inside normal noise.
-
Target with logic: Make measured moves that aren’t based on impulse, but rather research and knowledge of the above chart pattern types.
-
Use tech to your advantage: Pattern recognition can be sped up with watchlists and alerts. Explore the benefits and risks of using AI in trading and then check out our picks for some of the top AI tools for trading.
-
Journal relentlessly: Snap the chart before and after. Record patterns, entry types, stop methods, R:Rs and, of course, your results. Your personal data will tell you which forex pattern trading approaches best suit your temperament and risk appetite.
Common mistakes to avoid with forex chart patterns
- Forcing patterns on messy price action: If you have to squint to see it, it’s probably not tradable.
-
Ignoring the higher-timeframe map: Trading a bull flag into weekly resistance invites risk.
-
Entering before confirmation: Many textbook shapes fail inside the pattern. Let the break (or retest) prove it.
-
Stops too tight: A stop inside typical average-true-range noise will get shaken out.
-
No plan for news: New data and central-bank events can invalidate patterns very quickly.
-
Over-leveraging wins or tilting after losses: Keep your risk per trade small and consistent.
-
Treating bilateral patterns as directional: Symmetrical triangles and diamonds need breakout confirmation.
Frequently asked questions
- How reliable are popular forex chart patterns in predicting market movements?
They’re descriptive, not predictive. They become more reliable when trends align, there’s a clean structure and with confirmation. That being said, always use stops. - What timeframes are best for spotting popular forex chart patterns?
H4–Daily for cleaner signals and H1–H2 for execution. Multi-timeframe alignment can improve the odds. - Can popular forex chart patterns fail, and what causes them to do so?
Yes. Ranging conditions, macro shocks and crowded levels can all cause failures. That’s why entries, stops and size rules matter. - How do forex chart patterns differ from stock patterns?
The principles are similar. Forex trades 24/5 and reacts strongly to central-bank events. Intraday patterns can resolve faster. - What indicators complement popular forex chart patterns effectively?
RSI/MACD for momentum, ATR for stops and moving averages for dynamic support/resistance. Use indicators to confirm. - Are bilateral chart patterns commonly used in forex pattern trading?
Yes. Symmetrical triangles and diamonds are common. Trade the breakout and avoid predicting a potential direction without any evidence.
Start using forex chart patterns in your trading strategies
Forex charts help you identify the most profitable entry prices, exit processes, take profit levels and stop-loss levels. They enable you to study the historical price movements that contribute to the analysis of future price movements.
Join Blueberry today to start Forex trading on a transparent and reliable platform.
Disclaimer: All material published on our website is intended for informational purposes only and should not be considered personal advice or recommendation. As margin FX/CFDs are highly leveraged products, your gains and losses are magnified, and you could lose substantially more than your initial deposit. Investing in margin FX/CFDs does not give you any entitlements or rights to the underlying assets (e.g. the right to receive dividend payments). CFDs carry a high risk of investment loss.