{"term":{"slug":"chart-patterns","term":"Chart Patterns","definition":"Recurring formations in price action that indicate likely continuation or reversal of a trend. In prop firm trading, chart patterns provide structured entries with defined risk levels critical for staying within drawdown limits.","extendedExplanation":"Chart patterns fall into two broad categories: continuation patterns (flags, pennants, triangles) that signal a trend resuming after a pause, and reversal patterns (head and shoulders, double tops/bottoms, wedges) that signal a trend ending. Prop firm traders rely on patterns because they produce high-probability setups with clearly defined stop-loss levels.\n\nThe key advantage of chart patterns in prop firm trading is measurability. Most patterns have a measured move target (the height of the pattern projected in the direction of the breakout), which allows precise risk-reward calculation before entry. Knowing your target in advance means you can size the trade to fit within your daily loss budget while targeting a reward that contributes meaningfully to the profit objective.\n\nFor evaluation accounts, patterns that form on the 15-minute to 4-hour timeframes tend to produce the best results. Lower timeframes generate excessive noise and false breakouts that consume drawdown. Higher timeframes produce fewer setups but with stronger follow-through. Firms like FTMO (no time limit) are well-suited to pattern traders who wait for the right formation across multiple days.","exampleWithNumbers":"A bull flag forms on EUR/USD 1H chart after a 150-pip rally. The flag consolidates 40 pips. Breakout entry at the flag high, stop at the flag low (40-pip stop). Measured move target: 150 pips (the prior flagpole). On FTMO $100K, risking 1% ($1,000): position size = $1,000 / (40 pips * $10) = 2.5 lots. Target profit: 2.5 lots * 150 pips * $10 = $3,750. R:R = 1:3.75.","category":"strategy","relatedTerms":["head-shoulders","double-top","triangle-patterns","candlestick-patterns","market-structure"]},"_links":{"self":"https://runvigil.app/api/glossary/chart-patterns","page":"https://runvigil.app/learn/chart-patterns","allTerms":"https://runvigil.app/api/glossary","learn":"https://runvigil.app/learn"}}