Pattern playbook: bullish or bearish, and what to do

Chart patterns · Intermediate → Advanced · 14 min read

You will learn to

Tell at a glance whether a pattern is bullish or bearish
Know if it is a reversal or a continuation
Exactly what to do: confirmation, entry, stop, target, and when it has failed

Read this first

Every pattern answers two questions: which way (bullish ▲, bearish ▼ or either ◆) and what kind — a reversal (the trend before it is ending) or a continuation (a pause before the trend carries on).

Nothing counts until a candle closes through the line (neckline, boundary, rim). A forming pattern is a range, not a signal.
The stop goes where the pattern is proven wrong — beyond its extreme, never just a percentage away.
The target is the pattern’s height projected from the break (the measured move), or a fixed 2R, which is what the tested 4H rule uses.
Size from the stop: risk the same small % of your balance on every trade.

Quick rule of thumb: tops, a head and rising wedges point down; bottoms, an inverse head and falling wedges point up. Flags, ascending/descending triangles and cups usually continue the move before them. Symmetrical triangles and channel breaks go whichever way they break.

The patterns

Double top▼ BEARISHReversal · appears after a rise

Confirmed when	a candle closes below the neckline (the low between the two tops)
Do	Go short on the confirming close (or a limit back at the broken line)
Stop	above the higher top
Target	height of the pattern, projected down from the neckline — or simply 2R, the tested rule
It has failed if	price closes back above the neckline, or makes a new high above both tops — exit, do not wait for the stop to “maybe” hold
Evidence	Tested on 4H: +0.38R per trade over 178 trades — the strongest single pattern here.

Double bottom▲ BULLISHReversal · appears after a fall

Confirmed when	a candle closes above the neckline (the high between the two bottoms)
Do	Go long on the confirming close (or a limit back at the broken line)
Stop	below the lower bottom
Target	height of the pattern, projected up from the neckline — or simply 2R, the tested rule
It has failed if	price closes back below the neckline, or makes a new low under both bottoms — exit, do not wait for the stop to “maybe” hold
Evidence	Tested on 4H: +0.13R per trade over 165 trades — positive but not reliable on its own.

Head and shoulders▼ BEARISHReversal · appears after a rise

Confirmed when	a close below the neckline (the line through the two lows either side of the head)
Do	Go short on the confirming close (or a limit back at the broken line)
Stop	above the right shoulder
Target	head-to-neckline height, projected down from the break — or simply 2R, the tested rule
It has failed if	a close back above the neckline, or above the right shoulder — exit, do not wait for the stop to “maybe” hold
Evidence	Part of the tested 4H pattern family; see the Head and shoulders lesson for its own result.

Inverse head and shoulders▲ BULLISHReversal · appears after a fall

Confirmed when	a close above the neckline
Do	Go long on the confirming close (or a limit back at the broken line)
Stop	below the right shoulder
Target	head-to-neckline height, projected up from the break — or simply 2R, the tested rule
It has failed if	a close back below the neckline, or below the right shoulder — exit, do not wait for the stop to “maybe” hold
Evidence	Part of the tested 4H pattern family.

Ascending triangle▲ BULLISHUsually continuation · appears in an uptrend

Confirmed when	a close above the flat top. Buyers keep paying more (rising lows) against sellers at one price
Do	Go long on the confirming close (or a limit back at the broken line)
Stop	below the last rising low
Target	height of the triangle at its widest, projected up from the break — or simply 2R, the tested rule
It has failed if	a close back inside the triangle, or a break of the rising lows (then treat it as bearish) — exit, do not wait for the stop to “maybe” hold
Evidence	Triangles together: part of the tested 4H family; alone, too few trades to judge.

Descending triangle▼ BEARISHUsually continuation · appears in a downtrend

Confirmed when	a close below the flat bottom
Do	Go short on the confirming close (or a limit back at the broken line)
Stop	above the last falling high
Target	height at the widest, projected down from the break — or simply 2R, the tested rule
It has failed if	a close back inside, or a break up through the falling highs (then treat it as bullish) — exit, do not wait for the stop to “maybe” hold
Evidence	Part of the tested 4H family.

Symmetrical triangle◆ EITHER WAYEither way — trade the break · appears anywhere; most often continues the trend before it

Confirmed when	a close outside either line — the side it breaks decides long or short
Do	Go with the break: long on a close above, short on a close below
Stop	back inside, beyond the last swing on the other side
Target	height at the widest, projected from the break — or simply 2R, the tested rule
It has failed if	a close back inside the triangle soon after the break (a fakeout) — exit, do not wait for the stop to “maybe” hold
Evidence	Part of the tested 4H family.

Rising wedge▼ BEARISHReversal (or the end of a bounce) · appears after a rise, or as a bounce inside a downtrend

Confirmed when	a close below the lower line. Each push up gains less: buyers are tiring
Do	Go short on the confirming close (or a limit back at the broken line)
Stop	above the last high inside the wedge
Target	back to where the wedge started — or simply 2R, the tested rule
It has failed if	a close back inside, or a strong break above the upper line — exit, do not wait for the stop to “maybe” hold
Evidence	Wedges: too few trades alone to judge (17 in a year on 5 pairs).

Falling wedge▲ BULLISHReversal (or the end of a pullback) · appears after a fall, or as a pullback inside an uptrend

Confirmed when	a close above the upper line. Each push down gains less: sellers are tiring
Do	Go long on the confirming close (or a limit back at the broken line)
Stop	below the last low inside the wedge
Target	back to where the wedge started — or simply 2R, the tested rule
It has failed if	a close back inside, or a break below the lower line — exit, do not wait for the stop to “maybe” hold
Evidence	Wedges: too few trades alone to judge.

Rising channel▲ BULLISHBullish while inside; bearish when it breaks down · appears an uptrend that moves in steps

Confirmed when	inside: buy near the lower line in the trend. Break: a close below the lower line ends it
Do	Go long on the confirming close (or a limit back at the broken line)
Stop	inside: under the lower line. After a break-down short: back inside the channel
Target	inside: the upper line. After a break: the channel width, projected down — or simply 2R, the tested rule
It has failed if	for a break-down short: a close back inside the channel — exit, do not wait for the stop to “maybe” hold
Evidence	Channels: too few trades alone to judge.

Falling channel▼ BEARISHBearish while inside; bullish when it breaks up · appears a downtrend that moves in steps

Confirmed when	inside: sell near the upper line. Break: a close above the upper line ends it
Do	Go short on the confirming close (or a limit back at the broken line)
Stop	inside: over the upper line. After a break-up long: back inside the channel
Target	inside: the lower line. After a break: the channel width, projected up — or simply 2R, the tested rule
It has failed if	for a break-up long: a close back inside — exit, do not wait for the stop to “maybe” hold
Evidence	Channels: too few trades alone to judge.

Bull flag (and pennant)▲ BULLISHContinuation · appears right after a sharp rise (the pole)

Confirmed when	a close above the flag’s upper line. The flag is a small, orderly drift down that keeps most of the pole
Do	Go long on the confirming close (or a limit back at the broken line)
Stop	below the flag’s low
Target	the pole’s height, projected up from the break — or simply 2R, the tested rule
It has failed if	the flag gives back more than half the pole, or price closes below the flag — exit, do not wait for the stop to “maybe” hold
Evidence	Flag breakouts (1H, explicit rule): +0.19R over 46 trades — not reliable.

Bear flag (and pennant)▼ BEARISHContinuation · appears right after a sharp fall (the pole)

Confirmed when	a close below the flag’s lower line
Do	Go short on the confirming close (or a limit back at the broken line)
Stop	above the flag’s high
Target	the pole’s height, projected down from the break — or simply 2R, the tested rule
It has failed if	the flag retraces more than half the pole, or price closes above the flag — exit, do not wait for the stop to “maybe” hold
Evidence	See the bull flag result.

Cup and handle▲ BULLISHContinuation · appears in an uptrend, after a rounded pullback

Confirmed when	a close above the rim after the small handle pullback
Do	Go long on the confirming close (or a limit back at the broken line)
Stop	below the handle’s low
Target	cup depth, projected up from the rim — or simply 2R, the tested rule
It has failed if	the handle drops into the lower half of the cup, or a close back under the rim — exit, do not wait for the stop to “maybe” hold
Evidence	Shown on the chart; not part of the tested set.

Inverse cup and handle▼ BEARISHContinuation · appears in a downtrend, after a rounded bounce

Confirmed when	a close below the rim after the handle bounce
Do	Go short on the confirming close (or a limit back at the broken line)
Stop	above the handle’s high
Target	cup height, projected down from the rim — or simply 2R, the tested rule
It has failed if	the handle rises into the upper half, or a close back above the rim — exit, do not wait for the stop to “maybe” hold
Evidence	Shown on the chart; not part of the tested set.

In NexusCore

See them: Indicators → Chart Patterns (all), or one family (Double top/bottom, Head & shoulders, Triangles, Wedges, Channels, Flags). Confirmed patterns are marked ✓ with their target; forming ones are dashed.
Trade one by hand: right-click the chart → Buy/Sell limit at the broken line, or use the Trade tab with the stop beyond the pattern.
Automate: Lab → Bots → Preset bots → 4H chart patterns (all) → Use. It enters on the confirming 4H close with the stop beyond the pattern and a 2R target.

✓ What our backtest found

The 4H pattern family as a whole (stop beyond the pattern, 2R target, after fees, data it was not built on, 10 pairs): +0.24R per trade over 687 trades — the only setup in this app with a tested edge. Single patterns on their own have fewer trades and much less certain results.

Checklist

☐ A candle has closed through the line

☐ I know which way this pattern points (▲ / ▼ / ◆)

☐ The stop is beyond the pattern’s extreme

☐ Size comes from that stop

☐ I know what “failed” looks like for this pattern

Check yourself

1. A double top that has just closed below its neckline is…

Bullish — buy
Bearish — a short setup ✓
Neutral until RSI confirms

Tops point down; the neckline close confirms it.

2. A falling wedge most often breaks…

Up ✓
Down
Sideways forever

Each push down gains less — sellers are tiring, so it is read as bullish.

3. A symmetrical triangle: which way do you trade it?

Always long
Always short
With the side it closes out of ✓

It has no built-in direction; the break decides.

4. A bull flag is…

A reversal at the top of a rise
A pause after a sharp rise that usually continues up ✓
A bearish pattern

Flags are continuation patterns in the direction of the pole.

5. Where does the stop go on an inverse head and shoulders long?

Below the right shoulder ✓
At the neckline
1% below entry

Below the right shoulder the pattern is no longer valid.

6. When is a pattern a trade signal?

As soon as you can see the shape
When a candle closes through its neckline or boundary ✓
When it appears on a higher timeframe

Until the close through the line, it is only forming — most never complete.

Practise it on real charts. In the app, this lesson comes with real examples (reveal what happened next), a graded drill and the track test. Open the Academy in NexusCore — free →