Chart patterns are shapes that price often makes on a chart. They don’t predict the future, but they help traders organise what they’re seeing, plan entries and — most importantly — decide where a trade is proven wrong. Here are five patterns worth knowing for gold (XAU/USD).
1. Head and shoulders
What it looks like: three peaks — a higher middle peak (the head) between two lower peaks (the shoulders). A line joining the lows between them is called the neckline.
What traders watch for: a close below the neckline after an uptrend, which can signal the trend is losing strength. The inverse head and shoulders is the mirror image at the bottom of a downtrend.
Where the stop usually goes: above the right shoulder (or below it for the inverse pattern).
2. Double top and double bottom
What it looks like: price reaches roughly the same high twice (double top, an “M” shape) or the same low twice (double bottom, a “W” shape).
What traders watch for: a break below the low between the two tops — or above the high between the two bottoms.
Why it’s popular for gold: gold often tests big round numbers (like $2,400 or $2,500) more than once, making these patterns common around key levels.
3. Triangles
There are three main types:
- Ascending triangle — flat top, rising lows. Often seen as buyers gradually pushing against resistance.
- Descending triangle — flat bottom, falling highs. The opposite.
- Symmetrical triangle — both lines converge. Price is “coiling” and a breakout can come in either direction.
What traders watch for: a decisive close outside the triangle, ideally with rising activity.
4. Flags and pennants
What it looks like: after a sharp move (the “flagpole”), price drifts sideways or slightly against the move in a small rectangle (flag) or small triangle (pennant).
What traders watch for: a break in the direction of the original move. These are known as continuation patterns — they often appear after strong moves on news.
5. Support and resistance “flips”
What it looks like: a level that used to stop price from rising (resistance) is broken, and later acts as a floor (support) when price comes back to it — or the other way round.
What traders watch for: a retest of the broken level that holds. Many traders find this one of the most practical setups because the level gives a clear place to put a stop-loss.
Tips for using chart patterns
- Wait for confirmation. Many patterns fail before they complete — a close beyond the key line is more reliable than an intraday poke.
- Always set a stop-loss. Every pattern has a point where it’s clearly wrong — put your stop there.
- Size your trade from the stop. Use our position-size calculator so a failed pattern only costs what you planned.
- Check the bigger picture. Patterns on the daily chart usually carry more weight than those on a 5-minute chart.
- Watch the calendar. Big US data can break any pattern in seconds.
Frequently asked questions
Which chart pattern is most reliable?
No pattern works every time. Many traders prefer support/resistance flips and double tops/bottoms because the levels are clear and easy to manage risk around.
What time frame is best for chart patterns?
Higher time frames (4-hour, daily) tend to produce clearer patterns. Lower time frames show more patterns but also more false signals.
Next step: Learn chart patterns step by step in Module 6 of our free course.
Capital at risk. This article is general education, not investment advice.