Reversal chart patterns: the profile library

From the picture to the trade logic

This is the profile library of the reversal patterns. Each pattern comes with the practical trade logic: where the neckline sits, where the entry forms on the close, where the stop belongs and how you measure the target from the pattern height.

You learn the principle behind them, and above all the honest failure rates, in ct-chartmuster-statistik. No pattern is a guarantee, plan every trade with a stop and position sizing.

Two highs at a similar level, with an interim low between them. The neckline sits on this interim low. Entry on the close below it, stop above the second high, target the pattern height (high minus neckline) projected downward. Bulkowski shows: the half target is hit far more often than the full one.

The mirror image at the bottom: two lows, with an interim high between them as the neckline. Entry on the close above the neckline, stop below the second low, target the pattern height upward. Unconfirmed, meaning without a neckline break, it is not a trade.

Three highs at a similar level instead of two. The neckline sits below the interim lows. The pattern is rarer and the break therefore more meaningful, but be sure to wait for the close below the neckline. Stop above the highest of the three highs.

Three lows at a similar level, neckline above the interim highs. Entry on the close above it, stop below the lowest of the three lows, target the pattern height upward. As with the triple top: better to trade one pattern too few than one without neckline confirmation.

Head and shoulders: left shoulder, higher head, lower right shoulder. The neckline connects the two interim lows. Entry on the close below the neckline, stop above the right shoulder, target the distance from head to neckline projected downward. One of the best known patterns, with a real failure rate.

The inverse head and shoulders is the bottoming formation: a lower head between two shoulders, neckline above the interim highs. Entry on the close above the neckline, stop below the right shoulder, target the head-to-neckline distance upward.

The rounding bottom is a slow, bowl-shaped turn without a sharp trigger. That makes it harder to trade: there is no clear neckline and no clean pattern-height target. Confirmation is the breakout above the right edge of the bowl, ideally with rising volume.

Cup and handle is a rounding bottom (the cup) plus a small pullback at the right edge (the handle). Entry on the breakout out of the handle, stop below the handle low, target the depth of the cup projected upward. Cleanly formed it is rare, and here too failure rates exist.