timothy sykes logo

Patterns To Watch

Trading Pattern Cheat Sheet: Tips + Free Download

Timothy SykesAvatar
Written by Timothy Sykes
Reviewed by Friedrich Odermann Fact-checked by Ed Weinberg
Updated 10/6/2023 11 min read

A trading pattern cheat sheet is a condensed guide that traders use to identify recurring price movements in the market. It’s a quick reference tool that helps traders make informed decisions based on historical data. This cheat sheet is especially useful for those who want to understand market trends and make trades that align with those trends.

Read this article because it equips you with a quick-reference tool that can be a game-changer in your trading journey.

I’ll answer the following questions …

  • What Is a Trading Pattern Cheat Sheet?
  • Why Do You Need a Trading Pattern Cheat Sheet?
  • What Types of Trading Patterns Are Included in the Cheat Sheet?
  • How Do You Use a Trading Pattern Cheat Sheet?
  • How Do You Confirm Patterns Using Other Indicators?
  • Can Cheat Sheets Replace Technical Analysis?

What Is a Trading Pattern Cheat Sheet?

© Millionaire Media, LLC

A trading pattern cheat sheet is essentially a quick-reference guide that outlines various trading patterns. It’s a tool that traders use to identify potential trading opportunities based on historical price movements. In my years of trading and teaching, I’ve found that having a cheat sheet can be a game-changer, especially for beginners.

Understanding the Concept

Post image

Get my weekly watchlist, free

Sign up to jump start your trading education!

The concept behind a trading pattern cheat sheet is simple: it’s a compilation of various trading patterns, such as candlestick patterns and chart patterns, that recur in the market. These patterns can indicate potential price movements, helping traders decide when to enter or exit a trade.

Why Do You Need a Trading Pattern Cheat Sheet?

You need a trading pattern cheat sheet because it simplifies complex market data into easily digestible information. It’s like having a playbook in sports; it gives you a set of strategies to consider before making any trading decisions.

Click here to download a sample trading pattern cheat sheet.

Types of Trading Patterns

Trading patterns come in various forms and can be categorized into three major types. Understanding these can significantly improve your trading strategy, something I emphasize in my courses.

3 Major Types of Chart Patterns

The three major types of chart patterns are reversal patterns, continuation patterns, and bilateral patterns. Reversal patterns signal a change in the direction of the trend, while continuation patterns indicate that an existing trend will continue. Bilateral patterns, on the other hand, can signal either a reversal or continuation.

Reversal Patterns

Reversal patterns like head and shoulders or double tops and bottoms indicate a potential change in the market trend. These patterns are crucial for traders looking to capitalize on new trends. They can be particularly useful in forex markets where currency values are always fluctuating.

While head and shoulders or double tops and bottoms are classic reversal patterns, let’s not forget about candlestick patterns like the bearish engulfing candle. This pattern can be a strong indicator of a potential market downturn. It’s particularly useful when you’re trading volatile assets where quick reversals are common. If you want to dive deeper into how a bearish engulfing candle can signal a market reversal, check out this detailed guide.

Continuation Patterns

Continuation patterns like flags and pennants suggest that the current market trend will continue. These are particularly useful in trending markets, whether it’s stocks or crypto, and can help traders make more informed decisions.

Bilateral Patterns

Bilateral patterns like triangles can go either way. They don’t indicate a specific direction but signal that a significant price movement is about to happen. These are often seen in volatile markets like crypto.

How To Use a Trading Pattern Cheat Sheet

Using a trading pattern cheat sheet is straightforward but requires attention to detail. I’ve always told my students that the devil is in the details when it comes to trading.

Reading and confirming patterns is one thing, but how you trade them is another. One advanced strategy to consider is using credit spreads in options trading. This strategy can be particularly effective when you’ve identified a strong pattern and want to capitalize on it with minimized risk. For a comprehensive understanding of how to use credit spreads in your trading, here’s a useful article.

Reading and Confirming Patterns

Reading a cheat sheet involves identifying patterns and confirming them with other indicators like moving averages or RSI. Confirmation is crucial to avoid false signals. For instance, a breakout in price action could confirm a flag pattern.

How To Trade with Chart Patterns

Once you’ve identified a pattern, the next step is to decide your entry, stop-loss, and target levels. This is where your trading plan comes into play. A well-thought-out plan can be the difference between a profitable trade and a loss.

Take Profit & Stop Loss Strategies

Knowing when to take profit or set a stop-loss is crucial for effective money management. These strategies help you manage risk, something every trader needs to master. For example, setting a stop-loss below the support level can protect you from significant losses.

Can Cheat Sheets Replace Technical Analysis?

While cheat sheets are useful, they can’t replace in-depth technical analysis. They serve as a starting point or a quick reference but should not be the sole basis for your trading decisions.

Limitations and Advantages

Cheat sheets have their limitations. They provide a snapshot but don’t account for market volatility or other external factors. However, their advantage lies in quick access to essential pattern information, which can be invaluable, especially for beginner traders.

Cheat sheets are great for quick pattern recognition, but remember, they don’t account for stock characteristics like float. Low float stocks can exhibit extreme volatility, making pattern recognition tricky but potentially more rewarding. If you’re interested in how low float stocks fit into pattern trading, you’ll find this guide invaluable.

Key Takeaways

© Millionaire Media, LLC

A trading pattern cheat sheet is an invaluable tool for both beginner and experienced traders. It provides quick access to various trading patterns, helping you make informed decisions. But remember, while cheat sheets are useful, they should be used in conjunction with other forms of analysis and tools.

Trading isn’t rocket science. It’s a skill you build and work on like any other. Trading has changed my life, and I think this way of life should be open to more people…

I’ve built my Trading Challenge to pass on the things I had to learn for myself. It’s the kind of community that I wish I had when I was starting out.

We don’t accept everyone. If you’re up for the challenge — I want to hear from you.

Apply to the Trading Challenge here.

Trading is a battlefield. The more knowledge you have, the better prepared you’ll be.

What’s going on your cheat sheet? Let me know in the comments — I love hearing from my readers!

FAQs for Trading Pattern Cheat Sheets

What Do You Need to Keep in Mind About Trading Pattern Cheat Sheets?

When using a trading pattern cheat sheet, keep in mind that it’s a supplementary tool. It should be used in conjunction with a comprehensive trading strategy and risk management practices.

Do Trading Pattern Cheat Sheets Guarantee 100% Success?

No tool can guarantee 100% success in trading. Cheat sheets are no exception. They should be used as part of a broader trading strategy that includes various forms of analysis and risk management.

How Do Trading Patterns Differ Across Markets Like Stocks, Forex, and Crypto?

Trading patterns can vary across different markets. For example, patterns in the forex market may not hold the same weight in the crypto market due to differences in volatility and volume. Understanding these nuances is crucial for trading success.

What Trading Account Should Investors Consider for Forex?

To set up a trading account, investors interested in forex should choose a reliable platform. Consider looking at reviews and world regulations to make sure the company is legitimate.

How to Use Fibonacci and MACD in Uptrends?

Fibonacci and MACD are excellent indicators for identifying uptrends. While Fibonacci highlights potential resistance levels, MACD can gauge momentum. Use them in conjunction to get a full picture of the market prices.

What Content Is in the Trading Pattern Cheat Sheet?

The content includes examples, position advice, and range guidelines. We also offer recommendations and the reason behind each trading pattern. Make sure to visit the page dedicated to this.

Where Can I Find Quality Trading Ideas?

Quality ideas for trading can be found through careful analysis of charts, especially forex charts. Look for patterns such as highs and lows to identify the trend direction. Peer reviews can also be a great resource.

How to Recognize Cup and Handle Pattern?

The cup and handle pattern can often be identified by its unique shape. During consolidation, the image of the chart forms a ‘U’ (the cup) followed by a slight downtrend (the handle). Traders often use this pattern to set their position.

How Does Psychology Affect Investment Decisions?

Psychology plays a significant role in investment decisions. Emotional control is crucial as emotions can cloud judgment and lead to irrational actions that can affect profits and market momentum.

Why Do Some Patterns Have Odd Names?

The name of a pattern often reflects its shape or the psychology behind it. For example, a “head and shoulders” pattern depicts the image of a person’s head and shoulders, guiding traders in what to expect.

Is There a Number Limit on Positions?

There’s no specific number limit on positions, but it’s essential not to overtrade. Overexposure can lead to increased risk and potential losses, even with a strong uptrend.

What Are the Significance of Consolidation Phases?

Consolidation phases matter because they offer a pause in market activity, allowing buyers and sellers to reevaluate their strategies. It can often precede a significant price peak or trough.

How Can I Keep Track of My Profits?

Tracking profits involves a disciplined approach where you monitor your trading account, positions, and investment categories. Some platforms offer many detailed analytics, enabling better profit management.

How To Trade Forex with Candlesticks?

Forex charts often use candlesticks to represent price movements. The candlesticks can show highs, lows, opening, and closing prices, helping traders to predict future resistance or support levels.

How much has this post helped you?

Leave a reply

Author card Timothy Sykes picture

Timothy Sykes

Tim Sykes is a penny stock trader and teacher who became a self-made millionaire by the age of 22 by trading $12,415 of bar mitzvah money. After becoming disenchanted with the hedge fund world, he established the Tim Sykes Trading Challenge to teach aspiring traders how to follow his trading strategies. He’s been featured in a variety of media outlets including CNN, Larry King, Steve Harvey, Forbes, Men’s Journal, and more. He’s also an active philanthropist and environmental activist, a co-founder of Karmagawa, and has donated millions of dollars to charity. Read More

* Results are not typical and will vary from person to person. Making money trading stocks takes time, dedication, and hard work. There are inherent risks involved with investing in the stock market, including the loss of your investment. Past performance in the market is not indicative of future results. Any investment is at your own risk. See Terms of Service here

The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

A 2019 research study (revised 2020) called “Day Trading for a Living?” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.

These studies show the wide variance of the available data on day trading profitability. One thing that seems clear from the research is that most day traders lose money .

Millionaire Media 66 W Flagler St. Ste. 900 Miami, FL 33130 United States (888) 878-3621 This is for information purposes only as Millionaire Media LLC nor Timothy Sykes is registered as a securities broker-dealer or an investment adviser. No information herein is intended as securities brokerage, investment, tax, accounting or legal advice, as an offer or solicitation of an offer to sell or buy, or as an endorsement, recommendation or sponsorship of any company, security or fund. Millionaire Media LLC and Timothy Sykes cannot and does not assess, verify or guarantee the adequacy, accuracy or completeness of any information, the suitability or profitability of any particular investment, or the potential value of any investment or informational source. The reader bears responsibility for his/her own investment research and decisions, should seek the advice of a qualified securities professional before making any investment, and investigate and fully understand any and all risks before investing. Millionaire Media LLC and Timothy Sykes in no way warrants the solvency, financial condition, or investment advisability of any of the securities mentioned in communications or websites. In addition, Millionaire Media LLC and Timothy Sykes accepts no liability whatsoever for any direct or consequential loss arising from any use of this information. This information is not intended to be used as the sole basis of any investment decision, nor should it be construed as advice designed to meet the investment needs of any particular investor. Past performance is not necessarily indicative of future returns.

Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”