Unit 2 · Level 3 · Chart Patterns
Why patterns exist at all
There's no magic in chart patterns: they're what repeatable human behavior looks like when plotted. A 'double top' is simply the crowd failing twice at the same price and losing faith. The pattern recurs because people recur. Learn the psychology and the shapes become obvious.
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What you get asked
Why do chart patterns repeat across decades and markets?
1929, 1999, 2021: different assets, same human loops. Patterns are fossils of emotion.
Match the pattern family to its psychology
Two families: 'pause then continue' and 'exhaust then reverse'. Every named pattern belongs to one.
A pattern only 'completes' when price ___ its boundary. Until then it's a rumor.
Half-formed patterns litter every chart. Trading them before the break is paying for a story that hasn't happened.
Patterns work 'often enough', not always. What League 2 concept makes that good enough to trade?
You don't need patterns to be prophecy. You need defined risk, asymmetric reward, and enough repetitions. Sound familiar? Everything stacks.
Two pushes to the same high, both rejected, then the middle level gives way. Name the pattern.
The 'M' shape: rally, reject, retry, reject at the SAME level, then the valley between them (the neckline) breaks. Textbook, and you just read it from raw candles.
Formi's warning about pattern-hunting:
Criteria first, then the chart. The brain is a pattern-completion machine; it finds faces in clouds and flags in noise. Written criteria are your protection against your own imagination. 🐜
The rest of this unit
Flags, triangles, double tops, traps: crowd psychology drawn on a chart.