Pattern

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DEFINITION of 'Pattern'

In technical analysis, the distinctive formation created by the movement of security prices on a chart. It is identified by a line connecting common price points (closing prices, highs, lows) over a period of time. Chartists try to identify patterns to try to anticipate the future price direction.
Also known as "trading pattern".

BREAKING DOWN 'Pattern'

Patterns in security prices occur daily. However, although the various kinds of price patterns may in hindsight be easy to understand and see on paper, it is much harder to spot, and trade these formations in real time. There are many different kinds of patterns in technical analysis: the cup and handle, ascending/descending channels and, among others, the head-and-shoulders pattern.

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