Technical Patterns for Beginners: The 5 Setups Every Trader Should Know

Why Patterns Matter More Than You Think

Markets are driven by human psychology, and humans are predictable. Fear, greed, hope, and regret create recurring patterns on price charts. Learn to recognize these patterns, and you'll spot opportunities before the crowd.

You don't need to know every pattern—just the reliable ones. Here are five that consistently signal momentum shifts.

1. The Breakout (Most Important)

A breakout occurs when price pushes through a level that has previously acted as resistance. It's the market's way of saying "something changed."

• What to look for: Price closes above resistance with higher-than-average volume

• Why it works: Trapped shorts must cover, and new buyers pile in

• Red flag: Low volume breakouts often fail (fakeouts)

2. The Higher Low

After a pullback, if price bounces from a level higher than the previous low, it signals buyers are stepping in earlier—a sign of strength.

• What to look for: A dip that doesn't reach the prior bottom

• Why it works: Buyers are more aggressive; sellers are exhausted

• Entry: Near the higher low, with stop below it

3. The Coil (Tight Range)

When price tightens into a narrowing range—smaller and smaller candles—it's building energy. The eventual breakout from a coil is often explosive.

Banana Farmer tip: Our system specifically looks for coiling patterns. When you see a "Coiling" badge, the asset is in a tight range with building pressure.

4. The Volume Spike

Unusual volume tells you something is happening. A massive green candle with 5x normal volume? Someone with information is buying. A red candle with huge volume after a run-up? Distribution.

• What to look for: Volume 2-3x or more above the 20-day average

• Context matters: Volume on breakouts confirms them; volume on reversals warns you

5. The Double Bottom

Price tests a support level twice and bounces both times. The second bounce confirms buyers are defending that level—a potential bottom.

• What to look for: Two lows at roughly the same price, weeks apart

• Confirmation: Wait for price to break above the peak between the two bottoms

Putting It Together

The best setups combine multiple patterns. A coil that breaks out on high volume? Strong. A higher low forming after a double bottom? Even better. Stack the odds in your favor.

Banana Farmer scans for these patterns across 10,000+ assets so you don't have to. When our system detects a pattern, it factors into the Ripeness Score—giving you ranked opportunities instead of endless chart-watching.