Basic Trend Concepts (Small recap of the last call)

• Uptrend: Higher highs (HH) + higher lows (HL). Price can move down short-term, but the bigger trend is up.
  
  
• Downtrend: Lower lows (LL) + lower highs (LH).
  
  
• Support: Area where price tends to bounce. Buyers step in.
  
  
• Resistance: Area where price tends to reject. Sellers step in.
  
  

Support and resistance can flip. If resistance breaks and becomes support, that is a strong bullish sign.’

What Is a Chart Pattern?

A chart pattern is simply price reacting between support and resistance in a recognizable structure.

Patterns form because market psychology repeats, allowing us to estimate:

• Likely direction
  
  
• Strength of the move
  
  
• Potential target levels
  
  

Patterns are hypotheses, not guarantees.
Confirmation (volume, OBV, retests) increases the probability.

Volume & OBV 

Volume, Why It Matters

Volume shows how much trading happened inside each candle.

• High volume: strong conviction, many participants, reliable move
  
  
• Low volume: weak momentum, thin liquidity, fakeouts likely
  
  

Simple rule:

Price shows the move. Volume shows the strength behind the move.

Breakouts with rising volume → more valid

Breakouts with low volume → often traps or liquidity grabs

Volume helps us confirm trends, breakouts, and reversals.

OBV (On-Balance Volume), why and how i use it

OBV is a volume indicator that shows whether volume is flowing into the market (buying pressure) or out of the market (selling pressure).

Instead of showing volume bars, OBV creates a line that moves based on price direction:

• If price closes higher than the last candle → OBV adds that candle’s volume
  
  
• If price closes lower → OBV subtracts the volume
  
  
• If price is unchanged → OBV stays the same
  
  

This makes OBV smoother and easier to use for pattern confirmation.

What OBV is used for:

• Confirming moves:
  If price breaks out and OBV is rising, the move is supported and more likely to continue.
  If price breaks out but OBV is falling, the move might be weak or fake.
  
  
• Spotting divergences:
  Price makes new highs but OBV doesn’t → buying pressure is weakening.
  Price makes new lows but OBV doesn’t → selling pressure is weakening.
  
  

OBV acts like a strength meter. It helps confirm whether a breakout, trend, or pattern has real volume behind it.

Its an indicator we should try to always pair with our chart patterns for a higher winrate. 

Louis’ Five Patterns

Pattern 1 — Bull Flag (The example from March-September 2024, $BTC)

• What it is: A continuation pattern in an uptrend. After a strong upward move, price often pauses or slightly retraces in a narrow channel, forming a “flag.”
  
  
• Why it forms: Early buyers take profits, causing a small pullback, but overall buying pressure remains strong. The market is consolidating before the next move.
  
  
• How to trade safely:
  
  
• Wait for a weekly close above the resistance line of the flag. (depending on the timeframe, wait for a close above from what timeframe your on. So on the 4-hour timeframe, wait fro a 4 hour candle over, and on the weekly timeframe wait for a weekly candle over)
  
  
• Check OBV to confirm volume is supporting the breakout. OBV rising means buyers are still strong. (It should rise up with price on the breakout, if not then the breakout might be a fakeout)
  
  
• Optional: wait for a retest of the broken resistance for additional confirmation. (Usually comes a retest, but not always. But it's more safe to trade with a retest)
  
  
• Stop-loss: Below the last lower high/higher low.
  
  
• Target: Measure the length of the initial upward move and project it from the bottom of the flag. (Use the candlecloses) Longer consolidations don’t guarantee higher moves, but they often lead to more explosive breakouts.

Pattern 2 — Head & Shoulders (Example August-December 2021, $BTC)

What it is: A reversal pattern signaling that buyers are losing momentum.

Structure:

• Left shoulder → initial high
  
  
• Head → higher high
  
  
• Right shoulder → lower high, showing weakening buying pressure (At the same level as the left shoulder)
  
  
• Neckline: Usually a straight line from where the left shoulder bottomed out.

Trading logic:

• Wait for a break below the neckline for confirmation.
  
  
• Retest of the neckline strengthens confirmation but is not needed. Sometimes it goes down before a retest.
  
  
• Liquidity sweep: price may spike above the neckline to trigger stop-losses before moving down.
• Stop-loss: Above the right shoulder; if price breaks here, pattern is invalid.
  
  

OBV: Should confirm weakening buying pressure and therefore in general go down.

Targets:

1. Neckline → first shoulder high (conservative) Place a line from the neck line to the first shoulder and put the line just under the neckline.
   
   
2. Neckline → head high (larger target) Place a line from the neck line to the “head”, then place that line slightly under the next line.

As usual we use the candle closes when drawing the line for our targets. 

Pattern 3 — Symmetrical Triangle (Example from july 2017-June 2020)

What it is: A continuation pattern formed when buyers and sellers lose strength at the same time.

Structure: Lower highs + higher lows → price gets squeezed into a tight range.

Trading logic:

• The breakout usually follows the previous trend direction. So if the triangle starts forming after an upwards move, then it has a higher chanse of breaking out to the upside.
  
  
• Confirmation: Weekly close outside the triangle + OBV moving in the breakout direction.
  
  
• Optional retest of breakout level strengthens signal.
  
  
• Stop-loss: Below last lower high (for bullish breakout, and opposite for the bearish case)
  
  

Target: Take a line from the first high, straight down to the support line. Then put that line at te latest lows weekly close.

Pattern 4 — Double Top (Example on $SOL November 2024-January 2025)

What it is: A reversal pattern indicating buyers are losing momentum.

Structure: Price rallies → hits resistance → falls → rallies again → fails to go higher and then goes more down.

Trading logic:

We put the neckline at the area where we first bottomed out.

• if we break below the neckline and have a bearish retest then we enter the trade.
  
  
• Liquidity grab: price may spike above first top to hit stop-losses before dropping.
  
  

Stop-loss: Above last higher high.

Target: Measure a line from the neckline to the first top candle-close, then put that line under the neckline. That's the target.

Tip: If the last higher high is unclear on weekly chart, check daily chart for better stop-loss placement.

Pattern 5 — Falling Wedge (Example on $BTC November 2024-April 2025)

What it is: Bullish continuation or reversal pattern. Price is falling, but selling pressure weakens over time and buyers enter. 

Structure: Two downward-sloping trendlines converge. Lower lows, but each push down is weaker. Buyers gain strength gradually.

Volume: Should decrease during formation and rise on breakout.

OBV: Should start to stabilize on the end before the breakout and rise when the breakout happens. If the OBV starts to stabilize then we might form a bottom. 

Best context: Forms inside a larger uptrend.

Trading logic:

• Wait for breakout above upper trendline.
  
  
• Confirmation: rising OBV + retest of breakout level.
  
  
• Stop-loss: below last low.
  
  

Target (On higher timeframes, weekly and daily): Measure initial impulse leg from start of uptrend to the top of the candle close. Put that line at the bottom candle close. 

If the timeframe is shorter (4-hour and less) then it might not move as high. Therefore use the earlier highs as targets (Where the highs hit the resistance). Set the targets a bit below that area. 

The difference from triangle: Falling wedge support line slopes downward; triangle support slopes upward.

Pattern Validity

Higher timeframe = stronger pattern reliability (weekly, monthly). (Weekly has the best winrate for patterns.)

Lower timeframes (1H, 5min) = noisy, less reliable.

Patterns can invert: inverse H&S, bear flags, double bottom.

Touchpoints: 3 touches usually confirm trendlines; more touches increase breakout likelihood.

Breakout + retest = strongest confirmation.

Liquidity & Stop-Loss Placement

The market hunts stop-losses.

Common mistake:
Placing stops right under support or right above resistance.

Better method:
Place stops below/above the previous significant HL/LH, because breaking that level changes the trend structure. That's my strategy which i recommend. 

Do I Trade Based on Patterns Alone?

No, as Oskar said: 

patterns form the hypothesis.
Indicators & OBV provide supporting arguments.
Breakouts + retests provide validation.

Think of it like this:

Pattern = hypothesis
OBV / indicators = supporting evidence
Breakout = confirmation
Retest = strongest confirmation

Log Scale vs Linear Scale, when to use what:

When to use Linear:
Use Linear when the price range inside the pattern is “small”. If price has moved less than ~90% from support to resistance. Works best on smaller timeframes (1m → weekly) where the percentage change is limited.

Examples:

• $50 → $80 (≈60% move) → Linear
  
  
• Tight weekly ranges or compact consolidation zones
  
  

When to use LOG:
Use LOG when the visible price move is 90% or more from support to resistance. LOG is ideal when the chart covers long time periods, strong trends, or large percentage moves. LOG keeps structures accurate when the chart stretches too much on Linear.

Examples:

• $50 → $150 (≈200% move) → LOG
  
  
• $2 → $40 (≈1900% move) → LOG (mandatory)
  
  
• Multi-year consolidations or long-term trend legs
  
  

Notes & Trading Logic:
There is no fully objective answer on when to use what. This depends on your trading style.
Oskar uses LOG almost always; Louis switches depending on the chart and timeframe.

The 90% rule is not perfect but is simple and works well for most traders.
 

A common rule to add is:

• Use LOG if the chart spans multiple years, even if the percentage move is unclear.

Until you find your own style, the 90% rule / multi-year rule is a reliable place to start. I recommend you to try out different strategies!.