Inkbok - Trading Patterns

Left Shoulder Head Right Shoulder Neckline

Head and Shoulders

A reversal pattern consisting of three peaks, with the middle peak (head) being higher than the two surrounding peaks (shoulders). It signals a potential trend reversal from bullish to bearish.

Reliability: 83% success rate in forex markets
Best Timeframes: Daily, 4H, 1H
Classic Head and Shoulders (Bearish) Inverse Head and Shoulders (Bullish)
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Left Shoulder Head Right Shoulder Neckline

Head and Shoulders

Reliability: 83% success rate in forex markets
Best Timeframes: Daily, 4H, 1H

Pattern Types:

  • Classic Head and Shoulders (Bearish)
  • Inverse Head and Shoulders (Bullish)

Identification Points:

  • Three peaks with the middle one highest
  • Neckline connecting the lows between peaks
  • Similar shoulder heights
  • Volume typically decreases with each peak

Best Markets:

  • EUR/USD
  • GBP/USD
  • USD/JPY

Trading Tips:

  • Wait for neckline break confirmation
  • Check volume on breakout
  • Place stop loss above right shoulder
  • Target distance equals head-to-neckline measurement

Common Mistakes to Avoid:

  • Trading before neckline break
  • Ignoring volume confirmation
  • Setting stops too tight
Classic Cup and Handle Shallow Cup Handle Breakout Deep Cup and Handle Deep Cup Handle Breakout Inverted Cup and Handle Inverted Cup Handle Breakdown Classic Cup and Handle: 1. Shallow cup (20-30% depth) 2. Smooth U-shape 3. Handle slightly downward 4. Common in bull markets Deep Cup and Handle: 1. Deeper cup (40-50% depth) 2. More pronounced U-shape 3. Longer formation period 4. Higher risk/reward ratio Inverted Cup and Handle: 1. Inverted U-shape 2. Upward sloping handle 3. Bearish reversal pattern 4. Strong volume on breakdown

Cup and Handle

A bullish continuation pattern resembling a cup with a handle, indicating a pause in an uptrend before continuation.

Reliability: 80% success rate when properly formed
Best Timeframes: Weekly, Daily, 4H
Classic Cup and Handle Inverted Cup and Handle (Bearish)
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Classic Cup and Handle Shallow Cup Handle Breakout Deep Cup and Handle Deep Cup Handle Breakout Inverted Cup and Handle Inverted Cup Handle Breakdown Classic Cup and Handle: 1. Shallow cup (20-30% depth) 2. Smooth U-shape 3. Handle slightly downward 4. Common in bull markets Deep Cup and Handle: 1. Deeper cup (40-50% depth) 2. More pronounced U-shape 3. Longer formation period 4. Higher risk/reward ratio Inverted Cup and Handle: 1. Inverted U-shape 2. Upward sloping handle 3. Bearish reversal pattern 4. Strong volume on breakdown

Cup and Handle

Reliability: 80% success rate when properly formed
Best Timeframes: Weekly, Daily, 4H

Pattern Types:

  • Classic Cup and Handle
  • Inverted Cup and Handle (Bearish)

Identification Points:

  • U-shaped cup formation
  • Smaller handle pullback
  • Rounded bottom in cup
  • Volume decreases in handle

Best Markets:

  • EUR/USD
  • GBP/USD
  • USD/CHF

Trading Tips:

  • Enter on handle breakout
  • Check volume increase on break
  • Target based on cup depth
  • Stop below handle low

Common Mistakes to Avoid:

  • Trading shallow cups
  • Ignoring volume patterns
  • Premature entry
Ascending Channel (Bullish) Upper Target Resistance Support Descending Channel (Bearish) Lower Target Resistance Support Horizontal Channel (Range) Resistance Support Buy Zone Sell Zone Ascending Channel: 1. Parallel upward sloping lines 2. Buy at support, sell at resistance 3. Breakout targets equal channel width 4. Higher highs and higher lows 5. Confirms bullish trend Descending Channel: 1. Parallel downward sloping lines 2. Sell at resistance, buy at support 3. Breakdown targets equal channel width 4. Lower highs and lower lows 5. Confirms bearish trend Horizontal Channel: 1. Parallel horizontal lines 2. Buy at support, sell at resistance 3. Indicates trading range/consolidation 4. Breakout direction signals new trend 5. Width indicates volatility Trading Guidelines: • Minimum 4 touch points required • Channel width should remain consistent • Volume confirms trend strength • False breakouts common - wait for confirmation • Risk management essential at boundaries

Channel Patterns

Price movements contained between parallel trendlines, showing a consistent trend direction.

Reliability: 82% success rate in trending markets
Best Timeframes: Daily, 4H, 1H
Ascending Channel (Bullish) Descending Channel (Bearish) Horizontal Channel (Range)
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Ascending Channel (Bullish) Upper Target Resistance Support Descending Channel (Bearish) Lower Target Resistance Support Horizontal Channel (Range) Resistance Support Buy Zone Sell Zone Ascending Channel: 1. Parallel upward sloping lines 2. Buy at support, sell at resistance 3. Breakout targets equal channel width 4. Higher highs and higher lows 5. Confirms bullish trend Descending Channel: 1. Parallel downward sloping lines 2. Sell at resistance, buy at support 3. Breakdown targets equal channel width 4. Lower highs and lower lows 5. Confirms bearish trend Horizontal Channel: 1. Parallel horizontal lines 2. Buy at support, sell at resistance 3. Indicates trading range/consolidation 4. Breakout direction signals new trend 5. Width indicates volatility Trading Guidelines: • Minimum 4 touch points required • Channel width should remain consistent • Volume confirms trend strength • False breakouts common - wait for confirmation • Risk management essential at boundaries

Channel Patterns

Reliability: 82% success rate in trending markets
Best Timeframes: Daily, 4H, 1H

Pattern Types:

  • Ascending Channel (Bullish)
  • Descending Channel (Bearish)
  • Horizontal Channel (Range)

Identification Points:

  • Parallel trendlines
  • At least 3 touches each side
  • Consistent slope
  • Regular price oscillation

Best Markets:

  • EUR/USD
  • USD/JPY
  • GBP/USD

Trading Tips:

  • Trade bounces off boundaries
  • Wait for confirmation candles
  • Use channel width for targets
  • Place stops beyond channel

Common Mistakes to Avoid:

  • Forcing parallel lines
  • Trading every touch
  • Ignoring broader trend