Chart Patterns Cheat Sheet: Who Gets Trapped in 10 Classic Patterns

Part 2 of the Candle Psychology Cheat Sheet A pattern becomes useful when you can explain who is under pressure, what price has to do next, and where your idea stops making sense.

Read the Positions Behind the Pattern

In the Candle Psychology Cheat Sheet, we looked at the fight inside one candle. A chart pattern stretches that fight across a series of swings. Buyers keep defending a floor. Sellers keep leaning on a ceiling. Eventually, one of those positions becomes harder to hold.

That is where the pattern gets interesting. A trader who sells support just before price reclaims it may have to buy back higher. A trader who buys a breakout just before it collapses may have to sell lower. Their exits can add pressure to a move, but the chart cannot tell you how many traders are involved or where their actual orders sit.

Treat the stop areas below as plausible locations, not a view into the order book. Each setup also has its own invalidation: the level that would make the planned trade wrong. Someone else's likely stop cluster and your own stop placement are different questions.

What Counts as Confirmation

For this cheat sheet, confirmation starts with a close beyond the relevant boundary. Use the timeframe on which you identified the pattern. A wick through a boundary is weaker evidence than a candle closing beyond it. Follow-through, or a retest that holds the broken level, can strengthen the case. A retest is not guaranteed, and waiting for one may mean missing the move.

Volume can add context when the data is meaningful, but it does not make a breakout safe. In crypto, one exchange's volume does not represent the whole market. Decide your entry and invalidation conditions before the break, rather than changing them to fit the next candle.

Double Top

After an advance, price tests a similar high twice, with a pullback between the peaks. Who gets trapped and where stops may sit: Buyers near the highs come under pressure if price loses the intervening low, often called the neckline. Long stops may sit below that low; shorts may place buy stops above the peaks. What confirms it: A close below the neckline. A failed attempt to reclaim it gives a short setup a clearer reference. Where the trade stop goes: For a retest short, above the rejection swing high, with room for normal volatility. A broader pattern stop above the peaks is farther away and needs smaller size. What failure tells you: A sustained neckline reclaim weakens the breakdown; a move above both peaks invalidates the double-top reversal.

Double Bottom

After a decline, price tests a similar low twice, with a bounce between them. Who gets trapped and where stops may sit: Sellers near the lows can be left wrong when price clears the intervening high. Short stops may cluster above that neckline; long stops may sit below the bottoms. What confirms it: A close above the neckline, then continued strength or a retest that holds it as support. Where the trade stop goes: For a retest long, below the defended retest swing low.

A stop below both bottoms uses the wider pattern structure. What failure tells you: Losing the reclaimed neckline puts breakout buyers under pressure. A fresh low below both bottoms invalidates the reversal.

Head and Shoulders

A higher middle peak sits between two lower peaks after an advance. Who gets trapped and where stops may sit: Late longs face pressure below the neckline; their sell stops may sit there. What confirms it: A neckline close below, ideally followed by a rejected reclaim. Where the trade stop goes: For a short, above the right shoulder or the retest swing high, depending on the entry. What failure tells you: A neckline reclaim warns of failure. Above the head, the bearish pattern is invalid. The shoulder stop can end the trade sooner.

Inverse Head and Shoulders

A lower middle trough sits between two higher troughs after a decline. Who gets trapped and where stops may sit: Late shorts face pressure above the neckline; their buy stops may sit there. What confirms it: A neckline close above, with follow-through or a successful retest. Where the trade stop goes: For a long, below the right shoulder or the defended retest swing low. What failure tells you: Losing the neckline warns of failure. Below the head, the bullish pattern is invalid. A tighter trade stop may trigger first.

Ascending Triangle

Higher lows press into a roughly flat resistance level. Buyers are bidding higher, but the ceiling still matters. Who gets trapped and where stops may sit: Sellers leaning on that ceiling may be trapped by an upside break. Their stops may sit above resistance; buyers' stops may sit below the rising swing lows. What confirms it: A close above resistance, followed by acceptance above it or a defended retest. Higher lows alone are not the breakout. Where the trade stop goes: For a breakout long, below the relevant defended swing or retest low. If that distance is too large, reduce size or pass. What failure tells you: A return below resistance warns of a false break. Losing the rising support and recent swing low undermines the bullish structure.

Descending Triangle

Lower highs press into a roughly flat support level. Sellers are accepting lower prices, but support has not broken yet. Who gets trapped and where stops may sit: Buyers defending the floor may be trapped by a downside break. Their stops may sit below support; short stops may sit above the falling swing highs.

What confirms it: A close below support, followed by weakness or a retest that fails to regain the floor. Where the trade stop goes: For a breakdown short, above the relevant rejection swing or retest high, allowing for volatility. What failure tells you: Reclaiming the floor threatens the breakdown. A move through falling resistance and the recent swing high undermines the bearish structure.

Symmetrical Triangle

Lower highs and higher lows compress price between two converging boundaries. The shape alone does not choose the direction. Who gets trapped and where stops may sit: An upside break pressures shorts; a downside break pressures longs. Stops may gather beyond swing highs and lows on both sides. What confirms it: A close outside one boundary with follow-through, or a retest that holds outside. Do not assume the previous trend must resume. Where the trade stop goes: Beyond the defended retest swing on the other side of your entry: below for a long, above for a short. What failure tells you: A return inside the triangle warns that the first break failed. A confirmed break of the opposite boundary strengthens the opposite case, without guaranteeing it.

Bull Flag

A sharp advance pauses in a short, usually downward-sloping or sideways consolidation. Without the preceding impulse, it may just be a range. Who gets trapped and where stops may sit: Traders shorting the pause may be caught if the advance resumes. Buy stops may sit above flag highs; long stops may sit beneath the flag low. What confirms it: A close above the flag's upper boundary, with renewed upward movement. A tiny poke above the line is not enough by itself. Where the trade stop goes: Below the defended breakout-retest low, or below the flag low for a wider structural stop. What failure tells you: A return into the flag threatens breakout buyers. Breaking the flag low invalidates the simple continuation setup; it does not prove a larger downtrend.

Bear Flag

A sharp decline pauses in a short, usually upward-sloping or sideways consolidation. Who gets trapped and where stops may sit: Buyers treating the pause as a recovery may be caught when selling resumes. Sell stops may sit beneath flag lows; short stops may sit above the flag high. What confirms it: A close below the flag's lower boundary, with renewed weakness or a failed retest from underneath. Where the trade stop goes: Above the rejected retest high, or above the flag high for a wider structural stop. What failure tells you: A return into the flag threatens breakdown shorts. Clearing the flag high invalidates the simple continuation setup, even if the larger market remains weak.

Rectangle

Price repeatedly rotates between a flat support zone and a flat resistance zone.

Who gets trapped and where stops may sit: An upside break pressures range sellers; a downside break pressures range buyers. Stops may sit outside both edges, making either first break vulnerable to reversal. What confirms it: A close outside the range, followed by acceptance there or a retest that respects the broken edge. Where the trade stop goes: Beyond the retest swing inside the old range. A stop beyond the opposite range edge is a much wider trade and needs different sizing. What failure tells you: A quick return inside exposes breakout traders. A failed attempt to leave the range again strengthens the case that the original break has failed.

A Failed Pattern Is Information Too

Imagine a hypothetical range between $100 and $110. Price closes at $111, attracting breakout buyers, then falls back below $110. That return is a warning. If the next rally cannot reclaim $110 and price turns down again, the breakout buyers have a harder position to defend.

It still is not an automatic short. Price could reclaim the level again, and a trader who switches direction on every wick can lose on both sides. The failure gives you a new question: can price hold back inside the old range? Let that answer develop before treating the opposite trade as confirmed.

Keep the Stop Connected to the Idea

Choose the invalidation first, then calculate position size from the distance to it. Leave room for the instrument's normal movement and include fees and possible slippage in the risk estimate. A stop-market order can fill beyond its trigger; a stop-limit order may not fill at all. Check which price triggers the order on your exchange.

A tighter retest stop can be hit while the larger pattern remains valid. That does not make the stop wrong; it means you chose a narrower trade. Do not move it to the far side of the pattern after entry just to avoid taking the loss.

Final Take

The useful part of a chart pattern is the decision it helps you make. Who is under pressure? What confirms that pressure? Where does your trade become wrong?

Mark those answers before the breakout. If price fails to follow through, read the failure with the same attention you gave the setup. The pattern name stays the same. The traders under pressure can change.

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