Classic patterns are advanced forms of trend lines and channels. These patterns are formed with the help of pivots. In the topic of trend and channels, we explained that a trend will not remain stable forever and the share will change its direction after reaching its price target. The patterns that form at the end of the trend create patterns that can be used to make a better trading strategy. Classical patterns in technical analysis are divided into two categories: reversion and continuation, among which the continuation pattern can be mentioned. In this article, we are going to describe the return patterns. Among the types of return patterns that we will discuss here are the top pattern, the double floor or roof pattern, the triple floor or roof pattern, and the corner pattern.

Classic Head and Shoulders Reversal Pattern

The head and shoulders pattern, as one of the classic reversal patterns, is formed at the end of the trend and causes the trend to reverse. This model has three roofs. Sorushane pattern, as its name suggests, has two left and right shoulders and one head.

This pattern is formed when, in an upward trend, the price cannot make a ceiling higher than the previous ceiling. The line that connects the two lower valleys of the trend is called the neck line. In this pattern, after the price breaks the neck line, the price starts to fall with a pullback to it. It is better if the slope of the roof top pattern is slightly upward and start trading with the break of the neckline.

 Roof top reversal pattern strategy

In a downtrend, an inverted head and shoulder pattern with three valleys is formed and will cause the trend to reverse. In the pattern of the head and shoulders of the floor, it is better for the slope of the neckline to be downward.

The structure of the recursive pattern of the floor

In this pattern, when the neckline breaks or after a pullback to the neckline, we buy shares.

We put the loss limit under the left valley so that in case of violation of the pattern, we exit the transaction with the least loss. The profit limit is considered as the height of the head to the neck line, from the neck line.

The limit of damage and the limit of damage in the floor pattern

The ceiling pattern in the Iranian market is used to exit the stock and is used in the futures and forex markets to open a sell position.

Profit limit and loss limit in the roof top pattern

If the price hits the loss limit of the pattern and goes to the head, it can continue the path by breaking the resistance, but if the price rotates around the neck line during the pullback and does not choose its path, the pattern is violated.

The classic throwback twin roof pattern

As one of the classic reversal patterns, the twin ceiling pattern is formed at the end of an uptrend. This pattern is formed when the uptrend is no longer able to make a higher ceiling than its previous ceiling. After traders see that the price fails to break the previous ceiling for the second time, they exit the market. The line that passes through the last floor of the market is called the neck line.

The structure of the recurring pattern of the twin roof or the pattern of the two roofs or M

When the neckline is broken and the trend begins to fall, traders end their buying transactions by selling shares. In the Iranian stock market, the pattern of two ceilings is used to exit the market, but in the futures and forex markets, it can be used to open a sell position.

In this way, after forming two ceilings and breaking the neck line, upon entering the selling position, we set the loss limit slightly higher than the two ceilings and the profit limit as high as the height of the pattern ceiling to the neck line. Of course, the failure of the neck line is often accompanied by pullback.

Sales strategy in the pattern of two roofs

Violation of the pattern of two ceilings occurs when the price does not break the neck line with strength or falls with more number of candles after the formation of the second ceiling. In this case, it is possible that the pattern does not fall and increases to build the third ceiling and continues its upward trend after the previous ceiling is broken. For this reason, we said earlier to set the loss limit slightly higher than the two ceilings so that in case of violation of the pattern, we can exit the transaction with the least loss.

The classic throwback twin sole pattern

As one of the classic reversal patterns, the twin bottom pattern is formed at the end of the downtrend and announces the end of the downtrend. This pattern is formed when the price is unable to break the previous floor and sellers lose their dominance in the market and new buyers enter the market.

The line that passes through the last roof is called the neck line. The price may touch the neck line again during the ascent and then continue its trend.

The structure of the recursion pattern of the twin floor or double floor or W

At the time of formation of a double floor pattern, like a twin ceiling, we should wait for the break of the neckline. After breaking the neckline or pullback to it, you can buy shares. In this case, it is better to set the loss limit a little lower than the two bottoms, so that in case of violation of the pattern and continuing to fall, we can exit the market with the least loss.

We set the profit limit equal to the height of the two floors to the neck line. However, it is better to exit the market before reaching this target and sell shares a little lower than the target. This is the first profit limit after seeing the pattern. The profit limit is reached on the next steps with the trend tool or better fork.

Buying strategy in double floor pattern

Triple ceiling or floor pattern

In the twin floor or ceiling pattern, as one of the classic reversion patterns, if instead of two floors or two ceilings, three floors or three ceilings are formed, the pattern is renamed. In the model of three roofs or three floors, the validity of the model is higher. Because the resistance ceiling and the support floor have been tested more than twice and the pattern for trend reversal is more valid.

The structure of three-roof and three-floor patterns

Corner pattern

The valley or corner pattern is one of the classic return patterns of the triangle pattern. With the difference that in the triangle pattern, the two support and resistance lines move in opposite directions, but in the corner pattern, the top and bottom lines of the pattern are in the same direction. This pattern is a reversal type and appears at the end of the trend.

If the corner pattern appears in an upward trend, the pattern itself is upward and forms a valley and higher peaks like an upward trend; But the rising trend of the peaks is less steep than the rising trend of the valleys.

To trade in this pattern, from the time the pattern is broken and the stock starts to fall, the profit limit is equal to the rule of the corner pattern. Also, the loss limit is placed above the last peak. Trading with this model is done in futures and forex markets.

The structure of the corner reversal pattern in the uptrend and the profit limit for trading with this pattern

If the corner pattern is formed in a downward trend, the pattern itself is downward and, like the downward trend, forms higher floors and ceilings; But the descending slope of the valleys is slower than the descending slope of the peaks. Since the pattern is broken, the profit limit is equal to the rule of the pattern. Also, the loss limit is placed below the last valley.

The structure of the corner pattern in the downward trend and the profit limit for trading with this pattern

There is another type of corner pattern that is used to break the price and continue the trend. This pattern appears in a downward trend in an upward trend and an upward trend in a downward trend.

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