Chart pattern

A named formation in the geometry of a chart, identified by drawing lines across a sequence of swing highs and swing lows. Patterns are conventionally sorted into two families: continuation shapes, which form inside an existing move and are named for a pause in it, and reversal shapes, which form at the end of one and are named for a change of direction. The name describes the picture, not a mechanism.

Identification is manual and there is no formula behind it. Two chartists given the same window can draw two defensible boundaries, since the choice of which highs to connect, on which time frame, and whether to use closing prices or intraday extremes, is left to the reader. Most schools add a secondary condition before treating a pattern as complete, commonly a close beyond its boundary and sometimes a volume condition, and those conditions differ from author to author rather than being settled.

The honest difficulty is that a pattern is named after it has finished. While it is forming, the same bars are consistent with several shapes and with none. Published tests of pattern reliability disagree with one another, largely because they encode different drawing rules, and the disagreement has not resolved in decades of literature. The practical convention is to treat a pattern as a description of what price has done, not as a statement about what it will do next.