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Chart and candlestick patterns

What the shapes are, what people claim, and what research found.

• Do chart patterns work? What the research says
  Short version: the evidence is mixed, and patterns are hard to define objectively.
• Head and shoulders
  Three peaks with the middle one highest, said to signal a turn from up to down.
• Double top and double bottom
  Two peaks (or dips) at about the same level, said to signal a turn.
• Triangles
  Price swings that get smaller and squeeze into a triangle shape.
• Flags and pennants
  A short pause after a sharp move, shaped like a small flag or triangle.
• Wedges
  Two sloping lines that point the same way and come together.
• Cup and handle
  A rounded dip (the cup) followed by a small dip (the handle).
• Gaps
  A jump in price where nothing traded in between, visible as an empty space on the chart.

Candlestick patterns

• Doji
  A candle where the open and close are (almost) the same, so the body is a thin line.
• Hammer
  A candle with a small body at the top and a long lower wick.
• Engulfing pattern
  Two candles where the second body completely covers the first one.

Education only, not financial advice. No signals. Backtests are hypothetical: real trading can be worse. Past results don't predict future results.