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Trend, Chart Pattern & Market Structure

Updated over a month ago

Automated Pattern Recognition and Structural Analysis for Objective Trading Decisions

Learning Objectives:

  • Understand how to identify market structure objectively (not subjectively)

  • Recognize the 8 major chart patterns automatically detected

  • Use Change of Character (ChoCh) signals for trend reversals

  • Apply structural support and resistance levels

  • Combine pattern recognition with trend analysis

  • Trade with higher timeframe (HTF) confirmations

Time: 80-95 minutes | Prerequisites: Market Structure, Price Action | Difficulty: Intermediate to Advanced

Best For: Pattern trading, structural analysis, trend following, breakout trading | Markets: All liquid markets

What is Trend, Chart Pattern & Market Structure?

Trend, Chart Pattern & Market Structure is an automated technical analysis tool that removes subjectivity from chart reading. It identifies trend direction, detects classic chart patterns, and marks key structural levelsall algorithmically, so every trader sees the same thing.

The Subjectivity Problem in Technical Analysis

What traders struggle with:

  1. Subjective interpretation: "Is this a bull flag or just noise?"

  2. Inconsistent trend identification: One trader sees uptrend, another sees downtrend

  3. Pattern recognition bias: Seeing patterns that aren't there (confirmation bias)

  4. Structural level disagreement: Where exactly is support/resistance?

  5. Missed pattern formations: Human eyes can't scan 100+ charts efficiently

Traditional approach:

  • Manual chart reading (time-consuming, inconsistent)

  • "Draw your own trendlines" (subjective placement)

  • "Identify patterns yourself" (skill-dependent, biased)

  • Multiple traders see different things on same chart

Problems with traditional approach:

  • Subjectivity: 10 traders draw 10 different trendlines

  • Inconsistency: Same trader sees different patterns on different days

  • Emotional bias: In a position? You'll see confirming patterns

  • Time-consuming: Can't manually analyze 500 stocks daily

  • Skill ceiling: Requires years of practice to get good at pattern recognition

What Trend, Chart Pattern & Market Structure Does

Our approach:

  1. Objective Trend Identification

    • Algorithmic swing high/low detection

    • Clear trend classification (Uptrend, Downtrend, Range)

    • Multi-timeframe trend alignment

    • No subjective judgment

  2. Automated Pattern Recognition

    • Detects 8 classic chart patterns automatically

    • Mathematical pattern validation (not visual "close enough")

    • Pattern completion alerts

    • Success probability based on historical data

  3. Structural Analysis

    • Automatic support/resistance from swing points

    • Change of Character (ChoCh) signals for trend shifts

    • Break of Structure (BOS) for trend continuation

    • Order block detection (institutional levels)

  4. Multi-Timeframe Context

    • Higher timeframe (HTF) trend displayed on lower timeframe chart

    • Alignment indicators (when all timeframes agree)

    • Structure conflicts highlighted (HTF down, LTF up = caution)

Result: Instead of "I think this might be a bull flag forming," you get "Bull flag detected with 68% historical success rate, currently in setup phase, breakout target $145."

[CHART EXAMPLE: Same chart with manual analysis (subjective trendlines) vs automated structure (objective swing points and patterns)]

The Three Components

Component 1: Trend Identification (Market Structure)

What it analyzes:

  • Swing highs and swing lows (algorithmically defined)

  • Sequence patterns (HH/HL for uptrend, LH/LL for downtrend)

  • Trend strength (steep vs shallow)

  • Trend age (how long trend has persisted)

How it works:

Swing High Definition:

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A swing high is confirmed when: - Current candle high is higher than N candles before and after - N typically = 5 (configurable) - Creates a "pivot high" level

Swing Low Definition:

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A swing low is confirmed when: - Current candle low is lower than N candles before and after - N typically = 5 (configurable) - Creates a "pivot low" level

Trend Classification Logic:

Uptrend:

  • Most recent swing high > previous swing high (Higher High)

  • Most recent swing low > previous swing low (Higher Low)

  • Pattern: HH + HL = Uptrend

  • Visual: Green trendline connecting lows

Downtrend:

  • Most recent swing high < previous swing high (Lower High)

  • Most recent swing low < previous swing low (Lower Low)

  • Pattern: LH + LL = Downtrend

  • Visual: Red trendline connecting highs

Range (No Trend):

  • Swing highs making equal highs

  • Swing lows making equal lows

  • OR: Mixed signals (HH but LL, or LH but HL)

  • Visual: Horizontal channel lines

[DIAGRAM: Swing high/low identification process with labeled candles]

[CHART EXAMPLE: Uptrend structure with HH/HL labeled, downtrend structure with LH/LL labeled]

Component 2: Chart Pattern Recognition

The 8 patterns automatically detected:

Pattern 1: Bull Flag / Bear Flag

Bull Flag Structure:

  • Pole: Sharp upward move (>5% in 3-10 candles)

  • Flag: Consolidation downward or sideways (parallel channel)

  • Breakout: Price breaks above flag resistance

  • Target: Pole height projected from breakout point

Mathematical validation:

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Bull Flag Criteria: 1. Pole angle > 45 degrees 2. Pole length > 5% price move 3. Flag retracement: 38%-62% of pole (Fibonacci) 4. Flag duration: 20%-50% of pole duration 5. Flag channels parallel (tolerance 10%) 6. Volume decreases during flag formation

Bear Flag: Same logic, inverted (downward pole, upward flag)

[CHART EXAMPLE: Bull flag with pole, flag, and breakout labeled, target projection shown]

Pattern 2: Ascending Triangle / Descending Triangle

Ascending Triangle Structure:

  • Resistance: Horizontal line at same high level (tested 2-3 times)

  • Support: Upward sloping trendline connecting higher lows

  • Breakout: Price breaks above resistance

  • Target: Base height (widest part) projected from breakout

Mathematical validation:

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Ascending Triangle Criteria: 1. Horizontal resistance (tolerance 1%) 2. Rising support trendline (min 2 touches) 3. Converging lines (triangle forms) 4. Volume contracts during formation 5. Breakout volume > 150% average

Descending Triangle: Same logic, inverted (horizontal support, falling resistance)

[CHART EXAMPLE: Ascending triangle with breakout and target]

Pattern 3: Symmetrical Triangle

Structure:

  • Upper trendline: Descending (connecting lower highs)

  • Lower trendline: Ascending (connecting higher lows)

  • Convergence: Lines meet at apex

  • Breakout: Can go either direction (60% continue prior trend)

  • Target: Base height projected from breakout

Mathematical validation:

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Symmetrical Triangle Criteria: 1. Both trendlines converging (symmetrical angles) 2. Minimum 4 touches (2 per line) 3. Breakout before 66% through pattern (closer to apex = weaker) 4. Volume contracts during formation 5. Breakout volume confirmation required

[CHART EXAMPLE: Symmetrical triangle with both breakout scenarios shown]

Pattern 4: Double Top / Double Bottom

Double Top Structure:

  • First peak: Price reaches high, then declines

  • Pullback: Price drops 10-20%

  • Second peak: Price returns to similar high (within 3% of first peak)

  • Neckline: Support level connecting the pullback low

  • Breakdown: Price breaks below neckline

  • Target: Distance from peaks to neckline, projected downward

Mathematical validation:

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Double Top Criteria: 1. Two peaks within 3% of each other 2. Peaks separated by 10+ candles 3. Pullback between peaks > 10% from first peak 4. Neckline clearly defined (swing low) 5. Breakdown below neckline with volume 6. Retest of neckline optional (50% of patterns)

Double Bottom: Same logic, inverted (two troughs, resistance neckline, breakout upward)

[CHART EXAMPLE: Double top with peaks, neckline, breakdown, and target]

Pattern 5: Head and Shoulders / Inverse Head and Shoulders

Head and Shoulders Structure:

  • Left shoulder: Initial peak

  • Head: Higher peak (center)

  • Right shoulder: Lower peak (similar to left shoulder)

  • Neckline: Support connecting lows between shoulders and head

  • Breakdown: Price breaks below neckline

  • Target: Distance from head to neckline, projected downward

Mathematical validation:

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Head and Shoulders Criteria: 1. Head is highest point (>5% higher than shoulders) 2. Left and right shoulders within 5% of each other (symmetry) 3. Neckline clearly defined (can be horizontal or slanted) 4. Volume decreases from left shoulder � head � right shoulder 5. Breakdown volume > average 6. Right shoulder tests but doesn't break prior high

Inverse Head and Shoulders: Same logic, inverted (head is lowest point, neckline is resistance, breakout upward)

[CHART EXAMPLE: Head and shoulders with all components labeled, target shown]

Pattern 6: Cup and Handle

Cup and Handle Structure:

  • Cup: U-shaped or rounded bottom (not V-shaped)

  • Depth: 12-33% decline from high to low

  • Duration: 1-6 months typically (7+ weeks minimum)

  • Handle: Small consolidation/pullback after cup formation (flag-like)

  • Breakout: Price breaks above cup rim

  • Target: Cup depth added to breakout point

Mathematical validation:

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Cup and Handle Criteria: 1. Cup shape: Rounded bottom (not sharp V) 2. Cup depth: 12%-33% from peak to trough 3. Cup duration: 7+ weeks for validity 4. Handle: Pullback 8%-15% from cup rim, lasts 1-4 weeks 5. Handle doesn't retrace >50% of cup advance 6. Breakout on increased volume (>50% avg)

[CHART EXAMPLE: Cup and handle with measurements]

Pattern 7: Wedge (Rising / Falling)

Rising Wedge Structure (Bearish):

  • Two converging trendlines: Both sloping upward

  • Lower highs: Upward but decelerating momentum

  • Higher lows: Support rising faster than resistance

  • Breakdown: Price breaks below support trendline

  • Target: Wedge height projected from breakdown

Mathematical validation:

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Rising Wedge Criteria: 1. Both trendlines rising (support steeper than resistance) 2. Converging lines (wedge narrows over time) 3. Volume decreases during formation (divergence) 4. Breakdown typically to downside (80% bearish) 5. Retest of broken support as new resistance common

Falling Wedge (Bullish): Same logic, inverted (both lines falling, support declining slower, breakout upward)

[CHART EXAMPLE: Rising wedge (bearish) and falling wedge (bullish) side by side]

Pattern 8: Rectangle (Trading Range)

Rectangle Structure:

  • Resistance: Horizontal line at consistent highs

  • Support: Horizontal line at consistent lows

  • Range-bound: Price oscillates between support and resistance

  • Breakout: Price breaks above resistance or below support

  • Target: Range height projected from breakout

Mathematical validation:

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Rectangle Criteria: 1. Horizontal resistance (tolerance 2%) 2. Horizontal support (tolerance 2%) 3. Minimum 2 touches of each level 4. Range duration: 2+ weeks typically 5. Breakout on increased volume 6. False breakouts common (require confirmation)

[CHART EXAMPLE: Rectangle pattern with breakout scenarios]

Component 3: Change of Character (ChoCh) and Break of Structure (BOS)

What these signals mean:

Change of Character (ChoCh)

Definition: A signal that the current trend may be ending. The market "character" is changing from trending to potentially reversing.

Bullish ChoCh (Potential uptrend starting):

  • In a downtrend, price breaks above a recent lower high

  • First sign of strength after weakness

  • Not yet a confirmed uptrend, but trend is weakening

  • Visual: Orange or yellow marker with "ChoCh �"

Bearish ChoCh (Potential downtrend starting):

  • In an uptrend, price breaks below a recent higher low

  • First sign of weakness after strength

  • Not yet a confirmed downtrend, but trend is weakening

  • Visual: Orange or yellow marker with "ChoCh �"

Trading implication:

  • Existing positions: Consider taking profits or tightening stops

  • New positions: Wait for confirmation (BOS) before entering counter-trend

  • High-risk traders: Can enter small counter-trend position with tight stop

  • Conservative traders: Sit on sidelines until trend clarity returns

Break of Structure (BOS)

Definition: Confirmation that the trend continues. The market structure remains intact.

Bullish BOS (Uptrend continuing):

  • Price breaks above a previous higher high

  • Trend structure confirmed

  • Safe to trade with the trend

  • Visual: Green marker with "BOS �"

Bearish BOS (Downtrend continuing):

  • Price breaks below a previous lower low

  • Trend structure confirmed

  • Safe to trade with the trend

  • Visual: Red marker with "BOS �"

Trading implication:

  • Trend followers: Look for pullback entries in the BOS direction

  • Confirmation: Use BOS to validate signals from other indicators

  • Stop placement: Place stops below recent structure (below HL in uptrend, above LH in downtrend)

[DIAGRAM: ChoCh vs BOS visual comparison with trend context]

[CHART EXAMPLE: Downtrend with ChoCh � (trend weakening) followed by BOS � (uptrend confirmed)]

The sequence:

  1. Established trend: BOS signals keep appearing (trend healthy)

  2. ChoCh appears: First warning sign (trend weakening)

  3. Opposite BOS appears: Trend reversal confirmed

  4. New trend established: New BOS signals in new direction

Multi-Timeframe Analysis

Higher Timeframe (HTF) Context

Why it matters: The daily chart trend is more important than the 5-minute chart trend. Trading against HTF trend = low probability.

How the indicator shows HTF:

  • HTF Trend Label: Displayed on chart (e.g., "HTF: Uptrend")

  • Alignment Indicator: Green when LTF and HTF agree, Red when conflict

  • HTF Structure Lines: Key HTF support/resistance projected onto LTF chart

Example scenarios:

Scenario 1: Alignment (Highest Probability)

  • HTF (Daily): Uptrend

  • LTF (1H): Uptrend

  • Signal: Strong buy signals on LTF have HTF support

  • Action: Take long trades with confidence

Scenario 2: Counter-Trend (Lower Probability)

  • HTF (Daily): Uptrend

  • LTF (1H): Downtrend (pullback)

  • Signal: Short signals on LTF are counter to HTF trend

  • Action: Trade long on LTF reversal signals, or skip LTF shorts

Scenario 3: Transition (Medium Probability)

  • HTF (Daily): ChoCh detected (trend weakening)

  • LTF (1H): Showing reversal pattern

  • Signal: HTF trend may be changing

  • Action: Cautiously trade LTF signals, reduce position size

[CHART EXAMPLE: Multi-timeframe view showing HTF structure on LTF chart]

Structure-Based Support and Resistance

How structural levels are determined:

  1. Swing High Resistance: Every confirmed swing high becomes resistance

  2. Swing Low Support: Every confirmed swing low becomes support

  3. Order Blocks: Zones where institutional orders created swing points (last bullish candle before swing high, last bearish candle before swing low)

  4. Unmitigated Zones: Structural levels that haven't been retested yet (high probability reaction zones)

Visual representation:

  • Support zones: Green shaded rectangles

  • Resistance zones: Red shaded rectangles

  • Order blocks: Darker shaded boxes (stronger zones)

  • Broken structure: Lines turn dashed or gray (no longer valid)

Trading with structural levels:

  • Entries: Look for long signals near support, short signals near resistance

  • Stops: Place stops beyond structural levels (below support for longs, above resistance for shorts)

  • Targets: Next structural level in your direction

  • Breakouts: Confirmed break of structure = new support/resistance created

[CHART EXAMPLE: Chart with multiple structural support/resistance zones marked, showing trades at these levels]

Setup Guide

Step 1: Get the Indicator

  1. Log in to TradeDots dashboard

  2. Navigate to Indicators section

  3. Find Trend, Chart Pattern & Market Structure

  4. Click Get TradingView Invite

  5. Copy invite URL

Step 2: Add to TradingView

  1. Open invite URL (logged into TradingView)

  2. Click "Add to Favorites"

  3. Confirm added

Step 3: Apply to Chart

Recommended first chart: SPY or QQQ, Daily timeframe

  1. Open TradingView

  2. Symbol: SPY

  3. Timeframe: Daily

  4. Indicators � Favorites � Trend, Chart Pattern & Market Structure

What you'll see:

  • Trend classification label (Uptrend/Downtrend/Range)

  • Trendlines connecting swing points

  • Structural support/resistance zones

  • ChoCh and BOS markers

  • Any detected chart patterns with labels

[SCREENSHOT: Indicator applied to SPY daily chart with all components visible]

Step 4: Configure Settings

Access settings:

  1. Click indicator name in legend

  2. Click gear icon (settings)

Key settings to configure:

Swing Detection Sensitivity

  • Low sensitivity (Default: 5): Fewer, more significant swings (less noise, clearer structure)

  • Medium sensitivity (3-4): Balanced (good for most timeframes)

  • High sensitivity (1-2): More swings detected (useful for lower timeframes like 5min, but more noise)

Recommendation: Start with default (5) on daily chart. Increase sensitivity on lower timeframes if needed.

Pattern Detection Settings

  • Enable/Disable specific patterns: Turn off patterns you don't trade

  • Pattern confirmation: Require volume confirmation (recommended ON)

  • Pattern alerts: Enable alerts when patterns form or breakout

Visual Settings

  • Show/Hide trendlines: Toggle trendline visibility

  • Show/Hide structure zones: Toggle support/resistance zones

  • Show/Hide ChoCh/BOS markers: Toggle structure change signals

  • HTF display: Choose which higher timeframe to display (4H on 1H chart, Daily on 4H chart, etc.)

Color customization:

  • Uptrend color (default: green)

  • Downtrend color (default: red)

  • Range color (default: gray)

  • Support/resistance zone colors

Step 5: Setting Up Alerts

Alert setup for pattern detection:

  1. Right-click chart � Add Alert

  2. Condition: Trend, Chart Pattern & Market Structure

  3. Options:

    • "Pattern Detected" - Alerts when any pattern forms

    • "Pattern Breakout" - Alerts when pattern breaks out

    • "ChoCh Signal" - Alerts when trend character changes

    • "BOS Confirmation" - Alerts when structure break confirms trend

  4. Configure notification method (popup, email, SMS via TradingView mobile)

Recommended alerts:

  • Pattern Breakout (for entry timing)

  • ChoCh Signal (for trend reversal awareness)

  • HTF Alignment Change (when HTF and LTF conflict resolves)

Reading the Indicator

Visual Elements Explained

1. Trend Classification Label

  • Location: Top left or top right of chart

  • Text: "Uptrend", "Downtrend", or "Range"

  • Color: Green (up), Red (down), Gray (range)

  • Meaning: Current algorithmic trend determination

2. Trendlines

  • Uptrend: Green line connecting swing lows (higher lows)

  • Downtrend: Red line connecting swing highs (lower highs)

  • Range: Horizontal gray lines at support and resistance

  • Purpose: Visual confirmation of trend structure

3. Swing Point Markers

  • Swing High: Small red triangle or dot above candle

  • Swing Low: Small green triangle or dot below candle

  • Purpose: Shows where algorithm identified structural pivot points

4. Support/Resistance Zones

  • Support: Green shaded horizontal rectangles

  • Resistance: Red shaded horizontal rectangles

  • Order Blocks: Darker shaded zones (institutional levels)

  • Purpose: Key structural levels for entries, stops, targets

5. ChoCh and BOS Markers

  • ChoCh �: Orange/yellow marker, trend weakening, potential reversal up

  • ChoCh �: Orange/yellow marker, trend weakening, potential reversal down

  • BOS �: Green marker, uptrend structure confirmed

  • BOS �: Red marker, downtrend structure confirmed

  • Purpose: Trend continuation vs reversal signals

6. Pattern Labels

  • Location: On chart where pattern is detected

  • Format: "Bull Flag", "Ascending Triangle", etc.

  • Additional info: Setup phase, breakout, target projection

  • Purpose: Automated pattern recognition alerts

7. HTF Context Box

  • Location: Usually top right

  • Text: "HTF: Uptrend" or "HTF: Downtrend" or "HTF: Range"

  • Alignment: "Aligned " (green) or "Conflict �" (red/yellow)

  • Purpose: Higher timeframe trend awareness

[ANNOTATED CHART: Complete chart with all 7 visual elements labeled and explained]

Trading Strategies

Strategy 1: Structure-Based Trend Following (Conservative)

Rules:

  1. Identify trend using trend classification label

  2. Wait for pullback to structural support (uptrend) or resistance (downtrend)

  3. Look for bullish signal at support (long) or bearish signal at resistance (short)

  4. Confirm with BOS marker in trend direction

  5. Enter on next candle open or limit order at structure

  6. Stop: Below structural support (long) or above structural resistance (short)

  7. Target: Next structural level in trend direction

Probability: ~65-70% win rate (trading with trend and structure)

Example:

  • Trend: Uptrend confirmed

  • Pullback: Price returns to green support zone ($195)

  • Confirmation: BOS � appears, confirming uptrend structure holds

  • Entry: $195 (at support)

  • Stop: $192 (below support zone)

  • Target: $205 (next resistance level)

  • R:R: 3.3:1

[CHART EXAMPLE: Structure-based trend following trade with entry, stop, target]

Strategy 2: Pattern Breakout Trading (Moderate)

Rules:

  1. Wait for pattern detection label (Bull Flag, Ascending Triangle, etc.)

  2. Monitor pattern as it develops (setup phase)

  3. Wait for breakout confirmation:

    • Price breaks pattern boundary

    • Volume increases >50% above average

    • Breakout candle closes beyond pattern line

  4. Enter on breakout confirmation or first pullback to broken level

  5. Stop: On opposite side of pattern or at pattern invalidation level

  6. Target: Pattern's projected target (automatically shown on chart)

Probability: ~60-65% win rate (depends on pattern type and confirmation)

Example:

  • Pattern: Ascending Triangle detected

  • Setup: Price consolidating, testing resistance at $150 three times

  • Breakout: Price closes above $150 with volume spike

  • Entry: $151 (breakout confirmation) or $150.50 on pullback retest

  • Stop: $146 (triangle base/support trendline)

  • Target: $158 (triangle height of $8 projected from breakout)

  • R:R: 2:1

[CHART EXAMPLE: Ascending triangle breakout trade]

Strategy 3: ChoCh Reversal Trading (Advanced, Higher Risk)

Rules:

  1. Identify established trend (Uptrend or Downtrend)

  2. Wait for ChoCh signal (trend character change warning)

  3. Look for reversal confirmation:

    • Price breaks opposite structure (ChoCh � followed by break above lower high)

    • Volume increasing in reversal direction

    • Reversal pattern forms (double bottom, inverse H&S, etc.)

  4. Wait for BOS in new direction (trend reversal confirmation)

  5. Enter on first pullback after BOS

  6. Stop: Beyond recent swing point (ChoCh level)

  7. Target: Previous swing extreme (old trend's end point)

Probability: ~55-60% win rate (reversals harder to catch than continuations)

Position sizing: Use half or 2/3 normal size (higher risk)

Example:

  • Trend: Downtrend (LH/LL structure)

  • ChoCh �: Price breaks above recent lower high ($180)

  • Reversal pattern: Double bottom forms

  • BOS �: Price breaks above next higher high ($185), confirming uptrend

  • Entry: $183 (pullback after BOS)

  • Stop: $178 (below ChoCh level and double bottom)

  • Target: $195 (previous swing high before downtrend started)

  • R:R: 2.4:1

[CHART EXAMPLE: ChoCh reversal trade from downtrend to uptrend]

Strategy 4: Multi-Timeframe Confirmation (Highest Probability)

Rules:

  1. Check HTF context box - must show trend alignment

  2. Identify HTF trend direction (Daily if trading 1H, 4H if trading 15min)

  3. On LTF, wait for pullback to HTF structural level

  4. Look for pattern formation or BOS signal in HTF trend direction

  5. Enter when LTF and HTF both signal same direction

  6. Stop: Below HTF structural support (long) or above HTF structural resistance (short)

  7. Target: Next HTF structural level

Probability: ~70-75% win rate (highest confirmation system)

Example:

  • HTF (Daily): Uptrend, currently at $200, support at $190

  • LTF (1H): Pullback to $192 (near HTF support)

  • LTF Signal: Bull flag detected at $192

  • HTF Structural Level: Green support zone at $190-192 (HTF)

  • Alignment Indicator: "Aligned " (both timeframes bullish)

  • Entry: $193 (bull flag breakout on LTF)

  • Stop: $189 (below HTF support zone)

  • Target: $210 (next HTF resistance)

  • R:R: 4.25:1

[CHART EXAMPLE: Multi-timeframe setup with HTF structure on LTF chart, showing perfect alignment entry]

Strategy 5: Structure Break and Retest (Technical)

Rules:

  1. Identify key structural level (support or resistance)

  2. Wait for confirmed break of structure:

    • Price closes beyond level

    • Volume confirms (>50% average)

    • BOS marker appears

  3. Wait for retest of broken level:

    • Price returns to broken support (now resistance) or broken resistance (now support)

    • Level should hold (role reversal)

  4. Enter on retest rejection (bullish candle at old resistance turned support, or bearish candle at old support turned resistance)

  5. Stop: Beyond retested level (old side of structure)

  6. Target: Next structural level or 2x stop distance

Probability: ~65-70% win rate (structure breaks are reliable when confirmed)

Example:

  • Setup: Resistance at $200 tested 3 times

  • Break: Price closes at $202 with volume spike, BOS � appears

  • Retest: Price returns to $200

  • Entry: $200.50 (bullish rejection candle at old resistance, now support)

  • Stop: $198 (below old resistance level)

  • Target: $205 (next resistance, or 2x stop = 2.5 points � 2 = $205)

  • R:R: 2:1

[CHART EXAMPLE: Structure break and retest with role reversal visualization]

Combining with Other Indicators

Combination 1: With Trend Following Buy Sell Signals

Logic: Use Chart Pattern & Market Structure for context, Trend Following for entry timing.

Process:

  1. Chart Pattern & Market Structure confirms trend and structural level

  2. Price approaches support (uptrend) or resistance (downtrend)

  3. Trend Following Buy Sell Signals generates strong signal at structural level

  4. Enter when both align

Example:

  • Structure: Uptrend, support zone at $150

  • Trend Following: Strong buy signal at $150

  • Alignment: Both indicators bullish, structural support + signal = high conviction long

Result: Higher win rate due to confirmation (~70-75%)

Combination 2: With Price Momentum Reversal

Logic: Use Chart Pattern & Market Structure for structural reversals, Price Momentum Reversal for extreme condition confirmation.

Process:

  1. ChoCh signal appears (trend character changing)

  2. Price Momentum Reversal shows bullish reversal signal (�) or bearish reversal signal (�)

  3. Reversal pattern detected (double bottom, H&S, etc.)

  4. Enter when all three align

Example:

  • ChoCh �: Appears after downtrend, signaling trend weakening

  • Price Momentum Reversal: Bullish reversal signal (�) at oversold extreme

  • Pattern: Double bottom detected

  • Alignment: All three confirm reversal = high conviction counter-trend entry

Result: Better reversal timing, fewer false reversals (~65-70% on reversals)

Combination 3: With Smart MACD

Logic: Use Chart Pattern & Market Structure for structural context, Smart MACD for momentum and divergence confirmation.

Process:

  1. Chart Pattern & Market Structure shows trend and key levels

  2. Price at structural support (uptrend) or resistance (downtrend)

  3. Smart MACD shows bullish divergence (price lower low, MACD higher low) or bearish divergence

  4. Enter when structure + divergence align

Example:

  • Structure: Uptrend, support at $140

  • Price action: Price makes lower low at $138 (below previous $140)

  • Smart MACD: MACD makes higher low (bullish divergence)

  • Alignment: Structure + divergence = high probability bounce

Result: Strong reversal and continuation signals (~70-75%)

Common Mistakes to Avoid

Mistake #1: Trading Every Pattern Detection

Error: Taking trades on every pattern label that appears

Problem: Not all patterns complete successfully. Some fail, some don't reach target.

Fix: Wait for pattern breakout confirmation (price breaks pattern boundary + volume confirmation) before entering. Patterns are only valid if they break out correctly.

Rule: Setup ` Trade. Breakout = Trade.

Mistake #2: Ignoring Higher Timeframe Context

Error: Trading LTF signals that go against HTF trend

Problem: HTF trend is stronger. Trading against it = low probability.

Example: HTF (Daily) is in strong downtrend, but you take long on 1H chart because of bullish pattern.

Fix: Always check HTF context box. Only trade LTF signals that align with HTF trend, or wait for HTF ChoCh before counter-trend trading.

Rule: HTF > LTF. Always.

Mistake #3: Entering on ChoCh Without Confirmation

Error: Entering reversal trades immediately when ChoCh signal appears

Problem: ChoCh is a warning, not a trade signal. Trend may weaken but not reverse. Many ChoCh signals result in consolidation, not immediate reversal.

Fix: Wait for BOS in opposite direction (trend reversal confirmation) or reversal pattern breakout before entering counter-trend.

Rule: ChoCh = "be careful", BOS = "trade this"

Mistake #4: Poor Stop Placement (Not Using Structure)

Error: Using fixed % stops (e.g., 2% stop) instead of structural stops

Problem: Fixed stops don't account for market structure. Often get stopped out by normal volatility before trade works out.

Fix: Place stops beyond structural levels (below support for longs, above resistance for shorts). Give the trade room to breathe within structure.

Example:

  • Entry: $150 (at support)

  • Wrong stop: $147 (2% below entry, arbitrary)

  • Right stop: $145 (below structural support zone)

Mistake #5: Pattern Bias (Seeing What You Want)

Error: Forcing patterns that aren't validated by the indicator

Problem: Human eyes see patterns everywhere (confirmation bias). The indicator uses strict mathematical validation.

Fix: Only trade patterns that the indicator explicitly labels and validates. If you see a pattern but the indicator doesn't, it's probably not valid.

Rule: Trust the algorithm, not your eyes.

Mistake #6: Overtrading in Range Markets

Error: Forcing trades when indicator shows "Range" classification

Problem: Trend-based strategies don't work well in ranges. Breakouts from ranges fail ~50% of the time (50/50 coin flip).

Fix: When indicator shows "Range", either skip trading or switch to range-bound strategies (buy support, sell resistance, tight stops). Better: wait for range breakout confirmation before trading.

Rule: If no clear trend, no clear trade.

Real-World Example

[CHART EXAMPLE: Complete trade walkthrough on AAPL]

Asset: AAPL (Daily Chart)

Setup:

  • Trend classification: Uptrend (HH/HL structure)

  • Pattern detected: Bull flag (pole from $160 to $175, flag consolidation $175 to $170)

  • Structural context: Support zone at $168-170 (previous swing low)

  • HTF context: Weekly chart also in uptrend ("HTF: Uptrend, Aligned ")

  • ChoCh/BOS: BOS � marker appeared at $172 during flag formation (uptrend structure holding)

Trade:

  • Entry: $176 (bull flag breakout above $175 with volume spike)

  • Stop: $168 (below structural support zone and flag low)

  • Target: $190 (pole height of $15 projected from breakout: $175 + $15)

  • Risk: $8/share (entry $176 - stop $168)

  • Reward: $14/share (target $190 - entry $176)

  • R:R: 1.75:1

Outcome:

  • Reached $189 in 12 trading days (just below target)

  • Profit: $13/share

  • Actual R:R: 1.625:1

  • Why it worked:

    • Uptrend confirmed (structure)

    • Valid bull flag pattern (algorithmic validation)

    • HTF alignment (weekly uptrend)

    • BOS confirmation (trend structure holding)

    • Structural support holding (confidence in setup)

What made this high-probability:

  • Trend confirmation (uptrend)

  • Pattern validation (bull flag detected and validated)

  • Structural support (key level held)

  • HTF alignment (weekly and daily both bullish)

  • BOS confirmation (structure intact)

  • Volume confirmation (breakout volume spike)

6 factors aligned = very high probability setup (~75% success rate on setups like this)

Advanced: Pattern Success Rates (Historical Data)

Based on historical pattern analysis (broad market data, liquid stocks):

Pattern

Success Rate

Average Gain/Loss

Best Timeframe

Bull Flag

68%

+12% gain

Daily, 4H

Bear Flag

67%

-11% gain

Daily, 4H

Ascending Triangle

72%

+15% gain

Daily, Weekly

Descending Triangle

71%

-14% gain

Daily, Weekly

Symmetrical Triangle

58%

+8% gain (direction dependent)

Daily

Double Top

65%

-10% loss

Daily, Weekly

Double Bottom

64%

+11% gain

Daily, Weekly

Head & Shoulders

63%

-13% loss

Daily, Weekly

Inverse H&S

62%

+14% gain

Daily, Weekly

Cup and Handle

65%

+18% gain

Weekly, Monthly

Rising Wedge

73%

-12% loss (bearish)

Daily, 4H

Falling Wedge

74%

+13% gain (bullish)

Daily, 4H

Rectangle

52%

+7% gain (direction dependent)

Daily

Key insights:

  • Wedges are most reliable (73-74% success rates)

  • Flags are strong (67-68% success rates) when confirmed with volume

  • Triangles vary (ascending/descending better than symmetrical)

  • Double tops/bottoms and H&S are moderate (62-65%)

  • Cup and handle has highest average gain but requires patience (weeks to months)

  • Rectangles are coin flips until breakout direction clear

Important notes:

  • Success rates assume proper breakout confirmation (volume + close beyond pattern)

  • Success = reaching minimum target (pattern height projection)

  • Many patterns exceed minimum targets

  • Failures often respect stops at pattern invalidation levels

  • Higher timeframes (daily/weekly) generally more reliable than lower timeframes (5min/15min)

Key Takeaways

Objective > Subjective: Algorithm removes bias and inconsistency from chart reading

Structure defines the game: Support, resistance, swing points dictate high-probability zones

ChoCh = warning, BOS = confirmation: Don't trade reversals on ChoCh alone, wait for BOS

Patterns need confirmation: Setup ` trade. Breakout with volume = trade.

HTF always wins: Never trade LTF signals against HTF trend without confirmation

Combine indicators for higher probability: Structure + momentum + volume = 70%+ setups

Ranges are tricky: If no trend, either skip or use range strategies with tight risk

Practice Exercises

Exercise 1: Trend Classification Practice

  • Open 10 random stock charts (daily timeframe)

  • Apply Trend, Chart Pattern & Market Structure indicator

  • Before looking at indicator, manually identify trend (uptrend/downtrend/range)

  • Compare your assessment to indicator's classification

  • Goal: 90%+ agreement after 50 charts

Exercise 2: Pattern Recognition Accuracy

  • Scan 20 charts for patterns (without indicator labels initially)

  • Note which patterns you see manually

  • Turn on indicator and compare

  • Goal: Understand which patterns you're missing or forcing that aren't validated

Exercise 3: ChoCh and BOS Identification

  • Find 10 trending charts with ChoCh signals

  • Track what happened after each ChoCh:

    • Did trend reverse (BOS in opposite direction)?

    • Did trend consolidate then continue (BOS in same direction)?

    • How long between ChoCh and BOS?

  • Goal: Understand ChoCh timing and BOS confirmation importance

Exercise 4: Multi-Timeframe Structure Analysis

  • Pick 5 stocks, open daily chart

  • Identify daily trend and key structural levels

  • Switch to 1H chart

  • Identify where 1H chart is relative to daily structure

  • Look for alignment or conflict

  • Goal: Get comfortable reading multiple timeframes simultaneously

Exercise 5: Structure-Based Trade Planning

  • Find 10 charts with clear uptrend or downtrend

  • Identify structural support (uptrend) or resistance (downtrend)

  • Plan hypothetical trades:

    • Entry: At structural level

    • Stop: Beyond structure

    • Target: Next structural level

    • Calculate R:R

  • Goal: Practice structure-based trade planning before real trades

Next Steps

Continue to: Price Reversal Probability + Forecast to add statistical probability analysis to your structural understanding.

Or explore: Combining Indicators to build complete multi-indicator trading systems.

Practice: Use TradingView Replay feature to backtest structure-based strategies on historical data. Aim for 50+ pattern trades in paper trading before live execution.

Remember: Trend, Chart Pattern & Market Structure removes subjectivity from technical analysis. The algorithm sees the same thing every time, no bias, no emotion. Your job is to trust the structure, confirm with other indicators, and execute with proper risk management. The indicator shows you what the market is doingyou decide how to trade it.

Related Articles
Price Action Fundamentals
Market Structure
Trend Following Buy Sell Signals
Indicator Quick Reference
Glossary of Terms
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