Price patterns are simple geometric shapes in the price chart of a stock. Technical analysts recognise certain shapes as having a specific meaning because in the past when such patterns have occurred, with a supposedly high repeatability the share price has tended to behave in a predictable manner at least for the near future.

Reversal patterns signify a change in direction of the trend. When the trend is up, reversal patterns include head-and-shoulders formations, double-tops, triple-tops, rounding-tops and decending-triangles. Turned upside down the same patterns (known then as inverted head-and-shoulders formations, double-bottoms, triple-bottoms, rounding-bottoms and ascending-triangles).

Other patterns indicate continuations in a trend, breakthroughs and gaps indicate strong pressure in the direction of the movement.

Volume often increases at a trend change as the last of the pessimists sell out at the bottom, or the last of the optimists all rush in at the top.

Another form of pattern trading is the Japanese Candlesticks method. Supposedly old time Japanese rice traders used a charting system to understand price movements and devised a complex spread of combinations involving one or more price bars, relating the Open, High, Low, Close prices for the day. This method takes a bit of learning to use, but it is easy enough to do with software, Metastock and Omnitrader both allow graphing in candle mode, with Omnitrader picking up candle combinations and highlighting them with a tag that when clicked explains the candlestick significance. Hard core candlestick traders learn literally hundreds of combinations, but for most people only a few have great significance.

Pattern methods are purely and simply a method of making an analysis at a single glance, without having to spend much time number crunching.

Used with effective money management and exit scheme, on top of a trend following system such methods can form an effective way of trading. No one ever said that trading needs to be complicated.