What chart patterns are — and what they are not
A chart pattern is a shape that price has made often enough that traders gave it a name: a double top, a bull flag, a falling wedge. Each one suggests what might come next. None of them guarantees it. Patterns are probabilities, and they fail often — the page includes a real failed breakout for exactly that reason.
Every example on the page is a real chart, mostly Bitcoin, with the dates and prices shown and what happened afterwards. Where an example is textbook, the page says so; where it is ambiguous, it says that too.
Market structure: highs, lows and trends
Before any named pattern, there is structure. In an uptrend, price makes higher highs and higher lows — Bitcoin between September 2023 and March 2024 is a near-perfect staircase, from a $26.5k low to a $73.8k high. In a downtrend it makes lower highs and lower lows, as it did from the $69k top of November 2021 down to $17.6k in June 2022.
Support is a level where buyers have repeatedly stepped in; resistance is a level where sellers have. In summer 2023 Bitcoin was rejected twice near $31.5k and held three times near $25k before breaking out on 23 October 2023.
Smart money concepts: BOS, CHoCH, liquidity, order blocks, FVG
Smart money concepts (SMC) are a set of trader terms for reading structure. They are trader vocabulary, not academic finance — useful words for describing a chart, not proof of what large players are doing.
Break of structure (BOS)
A break of structure is a close beyond the last swing high in an uptrend (or swing low in a downtrend) — the trend continuing. Bitcoin's July 2023 high of $31,804 held for three months; the close at $33,070 on 23 October 2023 was a clean bullish BOS.
Change of character (CHoCH)
A change of character is the first break against the trend — the earliest sign it may be turning. After the FTX collapse, Bitcoin made lower highs down to a $15,476 low on 21 November 2022; its close above $18,388 on 12 January 2023 was the CHoCH that marked the bottom of that bear market.
Liquidity and the sweep
Obvious highs and lows collect stop orders — liquidity. A liquidity sweep is when price pushes through such a level, triggers those orders, and closes back on the other side. On 7 April 2025 Bitcoin wicked below the obvious $76.6k low to $74,508, closed back above it, and was near $112k six weeks later.
Order blocks
An order block is the last opposite-coloured candle before a strong move that broke structure. Traders watch it as a zone price may return to. Bitcoin's last red day before the April 2025 rally, around $76–79k, was revisited on 10 April and held.
Fair value gaps (FVG)
A fair value gap is a three-candle imbalance: the first candle's wick and the third candle's wick do not overlap, leaving a gap price moved through too fast. Gaps are often, but not always, filled later. The 3–5 August 2024 crash left one that was filled three days later.
Premium and discount
Within a range, the upper half is called premium and the lower half discount. In 2024 Bitcoin ranged between about $49k and $73.8k; the September dip to about $52.5k sat deep in discount before the range broke upward in November.
Reversal patterns
- Head and shoulders: three peaks with the middle one highest. Bitcoin's 2021 version — $58.4k, $64.9k, $59.5k — broke its neckline on 17 May 2021 and price hit $30,000 two days later.
- Inverse head and shoulders: the same shape upside down, often near bottoms (Bitcoin, mid-2024, before its run toward $100k).
- Double top and double bottom: two tests of the same level that fail. Bitcoin's $64.9k and $69k tops of 2021 preceded the 2022 bear market; the $25.2k and $24.9k lows of 2023 preceded a rally to $35k.
- Triple bottom and rounding bottom: slower, broader bases — Bitcoin's three tests of about $29–30k in summer 2021, and its long curve out of the 2022 low.
Continuation patterns
- Bull and bear flags: a sharp move (the pole) followed by a tight pause, then continuation — Bitcoin's October–November 2023 bull flag, and its June 2022 bear flag that ended in the Celsius and 3AC crisis.
- Pennants: a flag whose pause narrows to a point — XRP, late 2024 into January 2025.
- Triangles: ascending (flat top, rising lows), descending (flat bottom, falling highs) and symmetrical. Bitcoin's July 2025 ascending triangle broke up to about $123k.
- Wedges: a rising wedge often breaks down, a falling wedge often breaks up — Solana's late-2023 falling wedge came before a run from about $20 to over $100.
- Rectangles and cup-and-handle: long ranges and a U-shaped base with a small pause at the rim — Bitcoin's 2021–2024 cup from $69k down to $15.5k and back to $73.8k.
Candlestick patterns
Single and small groups of candles carry information too: the doji (open and close almost equal — indecision), the hammer and shooting star (long wicks rejecting a level), bullish and bearish engulfing candles, and three-candle morning and evening stars. They matter most at important levels and on higher timeframes.
A free TradingView script that marks all of this
The page offers a free Pine Script indicator for TradingView that marks swing highs and lows (HH, HL, LH, LL), BOS and CHoCH, order blocks, fair value gaps that disappear once filled, equal highs and lows with sweeps, premium and discount zones, and Bitcoin halving lines. Paste it into TradingView's Pine Editor and add it to any chart. It draws the textbook definitions mechanically; a swing is only confirmed a few bars after it happens.
Questions people ask
What is a break of structure (BOS) in trading?
A BOS is a candle closing beyond the most recent swing high in an uptrend, or swing low in a downtrend. It signals that the existing trend is continuing.
What is the difference between BOS and CHoCH?
A BOS breaks structure in the direction of the trend; a change of character (CHoCH) is the first break against it. A CHoCH is often the earliest hint that a trend may be reversing, though it can also fail.
What is a fair value gap?
A fair value gap (FVG) is a three-candle imbalance where the wicks of the first and third candles don't overlap, showing price moved too quickly through a zone. Price often, but not always, returns to fill it.
What is an order block?
An order block is the last opposite candle before a strong move that broke market structure. Traders treat it as a zone price may revisit. It is a trader heuristic, not a guaranteed support or resistance.
What is a liquidity sweep?
A liquidity sweep is when price briefly pushes past an obvious high or low where many stop orders sit, triggers them, and then closes back inside. It often shows up as a long wick.
Are chart patterns reliable?
They are probabilities, not promises. Research such as Thomas Bulkowski's pattern statistics shows many patterns work somewhat more often than chance, but failure rates are substantial. Always know where the idea is invalidated.
Which timeframe is best for chart patterns?
Patterns on higher timeframes (daily, weekly) tend to matter more than those on minutes or hours, which contain more noise. Many traders read direction on a high timeframe and timing on a lower one.
Is the TradingView script free?
Yes. It is a free Pine Script file you can download or copy from the page and paste into TradingView's Pine Editor. It is for education and is not a trading system.