A price pattern is a recognizable configuration of price movement that is identified using a series of trend lines and/or curves.
Since price patterns are identified using a series of lines and/or curves, it is helpful to understand trend lines. Trend lines help technical analysts spot areas of support and resistance on a price chart. Trendlines are straight lines drawn on a chart by connecting a series of descending peaks (highs) or ascending troughs (lows). A trend line that is angled up, known as an up trend line, occurs where prices are experiencing higher highs and higher lows. Technical analysts have long used price patterns to examine current movements and forecast future market movements.
When a price pattern signals a change in trend direction, it is known as a reversal pattern where else a continuation pattern occurs when the trend continues in its existing direction following a brief pause.