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Whale Trading

Patterns: Reading Charts by Context, Not Just Shapes

If you have gone through candles, timeframes, volume, support/resistance,
and swing vs correction once, we can now move into what most people
are curious about the most.

“Exactly what kind of shape makes
price more likely to go up,
and what kind of shape makes
price more likely to go down?”

There are countless candlestick pattern and chart pattern images on the internet.
However, traders who survive in the markets for a long time
do not treat patterns as a simple “shape memorization subject.”

In this section, we will:

  • Look at patterns not as “pictures” but as “structures and context”
  • Clarify the role of candlestick patterns, chart patterns, and failure patterns
  • Discuss where patterns gain meaning and where they do not
  • See how patterns connect to indicators and strategies

from a big-picture perspective.

1. A Pattern Is Not Just a Shape, but a Summary of the Situation

Many beginners think of patterns like this:

“If this shape appears, buy.
If that shape appears, sell.”

In reality, a pattern is much closer to:

“A visual compression of what kind of battle happened between buyers and sellers,
and how that battle ended.”

For example:

  • A long lower wick with the close near the top of the candle
    → At that price area, heavy selling hit once,
    but buyers pushed the market back up again
  • Multiple upper wicks forming near the top of a range
    → Every time price reaches that zone,
    selling pressure repeatedly appears

So a pattern is not just:

  • “A named picture,” but
  • “A summarized result of the underlying price battle.”

The goal of this section is:

Instead of asking “What is this shape called?”
we first ask
“Why did this shape appear here?”

and train our eye accordingly.

2. The Three Axes of Patterns We Will Cover

Under the Patterns section,
we will broadly organize patterns along three axes.

  1. Candlestick Patterns (single or small groups)

    • Patterns formed by one candle or small clusters of 2–3 candles
    • Examples: long tail (pin bar–type), inside bar, engulfing, etc.
    • Useful for reading short-term shifts in sentiment
      and local reversals between buyers and sellers

  2. Chart Structure Patterns

    • Larger structural patterns in the broader move
    • Examples: triangles, flags/pennants, channels, head & shoulders, double top/bottom, etc.
    • Often used when discussing the probability of trend continuation or reversal

  3. Failure Patterns (Failed Patterns / Traps)

    • Looking at situations where a pattern that “should” have continued
      instead breaks and flips the other way
    • Examples: false breakout, swing failure, etc.
    • Many professional traders actually use
      “failed patterns” as trading opportunities.

Each type of pattern does not exist in isolation. It becomes meaningful only when combined with:

3. Where a Pattern Matters vs. Where It Does Not

The location of a pattern can completely change its value,
even if the shape itself looks identical.

Consider a strong reversal candlestick pattern:

  • A reversal pattern that appears after a long advance,
    near a higher timeframe resistance zone     vs
  • A similar-looking reversal that appears randomly
    in the middle of nowhere with no clear context

In real trading:

  • The former tends to be a much stronger signal candidate
  • The latter is often just noise

Throughout this section, we will repeat one central idea:

“Pattern = Shape + Location + Context”

We will treat a pattern as something worth serious consideration
only when these three pieces fit together.

4. Patterns and Timeframes: Same Shape, Different Meaning by Scale

As discussed in Timeframe Basics and
Swing vs Correction,
the weight of a pattern’s meaning changes by timeframe, even if the visual shape looks similar.

  • A reversal pattern on a 1-minute chart:
    • Could be meaningful for a scalper
    • But for a daily swing trader, it may be nothing more than noise
  • A reversal pattern on a daily chart:
    • Might represent a major shift in overall market sentiment
    • And can be broken down into many smaller entries/exits
      on lower timeframes

So in this section we will consistently ask:

  • Not just “What pattern is this?”
  • But “On which timeframe did it appear?”
  • And “What role does this pattern play in the higher-timeframe structure?”

5. How Patterns Relate to Indicators and Strategies

Patterns are not the entire strategy.

  • A pattern is closer to a trigger (an entry signal candidate), and
  • A full strategy must also define:
    • Entry conditions
    • Invalidation / stop loss
    • Position sizing
    • Take profit structure (R:R, scaling out, etc.)

In later sections, when we connect patterns with:

our aim will be:

Not “When this pattern appears, we always do X,”
but
“In this kind of context, when this pattern appears,
we can design a trade idea with this kind of structure.”

6. Common Traps in Pattern Learning

Once people start studying patterns,
they often fall into a few typical traps.

6-1. Turning Patterns into a Memorization Subject

  • Only memorizing names, shapes, and textbook examples:
    • “This looks like head & shoulders.”
    • “This looks like a pin bar.”
  • But ignoring where it appeared
    and what the larger structure looks like

This approach turns charts into a “field guide matching game”
and does not help much with real trading decisions.

6-2. Only Looking at Perfect Textbook Patterns in Historical Charts

  • On past charts, it is easy to cherry-pick
    the cleanest, most textbook-like patterns
  • But in live markets, most patterns are imperfect or messy,
    and ignoring them can lead to misunderstanding price action.

We will deliberately include more realistic, imperfect examples,
and discuss what kind of distortion can still be acceptable.

6-3. Trying to Find “The One Best Pattern”

  • “Which pattern works the best?”
  • “Is there one pattern I can just rely on?”

In real markets, no pattern has ever been 100%.
What we want to build is:

A realistic system where win rate, R:R, and trade frequency
work together, with patterns as one component.

7. Learning Roadmap for This Section

Under the

Patterns section, the content will broadly follow this flow:

  1. Big map of patterns (this article)
    • How to view patterns, context, and timeframes
  2. Basic candlestick patterns
    • Pin bar–type candles, inside bars, engulfing, etc.
    • Reading “short-term psychological reversals”
  3. Basic chart patterns
    • Continuation patterns: flags, pennants, channels, etc.
    • Reversal patterns: head & shoulders, double top/bottom, etc.
  4. Failure patterns and traps
    • False breakouts, swing failures, etc.
    • Viewing “broken patterns” as opportunities
  5. Bridging patterns into strategies
    • Combining patterns with support/resistance, volume, and indicators
      into a full trade idea

What Comes Next

In the next article, we will move into basic candlestick patterns, and:

  • Build on OHLC structure and wick concepts
    from Candle Structure Basics
  • Examine when single candles and small groups of 2–3 candles
    actually carry meaningful information

Again, our focus will be less on the visual shape itself and more on:

  • The surrounding trend
  • Nearby support/resistance levels
  • Accompanying volume patterns

From there, we will start with
Candlestick Patterns Part 1: Single-Candle Patterns.