Strategies · Lesson 13 · Advanced
Pattern Catalog with Statistics
You know the most reliable continuation and reversal patterns along with their failure rates, and you use the measure rule only as a conservative minimum.
With a free account: interactive chart exercises, quizzes with answers, progress and XP.
Numbers for comparison
Bulkowski warns: the average-rise figures assume perfect trades with no costs. They serve to compare patterns, not to estimate returns. With leverage, spread, slippage and funding eat up the edge.
Continuation is more reliable than reversal. The measure rule (add the pattern height to the breakout) is only a minimum, half the height is hit far more often.
Head and shoulders top: only the neckline break counts
Interactive exercise: here you learn right on the chart, with feedback on every click. Sign up freeto start it.
Which pattern is more reliable?
Interactive exercise: here you learn right on the chart, with feedback on every click. Sign up freeto start it.
The key points at a glance
- Failure rates serve to compare patterns, not as a promise of profit.
- High and tight flag and ascending triangle are reliable continuation patterns.
- Head and shoulders is the best top reversal.
- Trade reversal patterns only at the end of a trend, and enter only after confirmation.
Deep dive
Which chart patterns have the lowest failure rates?
Bulkowski's database of more than 38,500 samples gives you a clear ranking. The break-even failure rate measures how often a pattern fails to move even 5 percent in the right direction after the breakout. Single-digit numbers are good, anything above 20 percent is unacceptable.
- High and Tight Flag: 0 percent failure, the best continuation pattern.
- Head and Shoulders Top: 4 percent failure, the best reversal.
- Rising Wedge Down: 24 percent failure, stay away.
- Ascending Triangle Up: only rank 17 of 23, back of the pack.
Why a low failure rate does not guarantee a big move
A low failure rate only means the pattern rarely goes wrong right away. It says nothing about the distance. With the Head and Shoulders Top, 4 percent fail within the first 5 percent, but 68 percent never make it past 25 percent. So set your target at real structure, not at the full measure rule.
- Tall beats short: patterns above the median height almost always perform better.
- Between two formations, take the one with the larger range.
- Read the cumulative failure tables, not just the break-even number.
Throwback and pullback: why the retest hurts the statistics
A throwback is the return to the breakout price after an upside break, a pullback is the same after a downside break. Both occur in 40 to 75 percent of cases and rob the pattern of momentum. Avoid setups with congestion sitting right in front of them.
The retest also has an upside: a second, lower-risk entry with a tighter stop, usually after 8 to 16 days. And a busted pattern that flips to the opposite side often becomes a strong counter-trade. You can practice exactly this for free on the demo exchange.
Sources: Bulkowski, Murphy, Goodman
Make this lesson interactive
Sign up for free and learn with click exercises right on the chart, quizzes with explanations and saved progress. Then you practice everything risk free on the demo exchange.
100% free, no payment details.