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skills/pattern-recognition/SKILL.md
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skills/pattern-recognition/SKILL.md
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---
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name: pattern-recognition
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description: Use when identifying chart patterns or setups - recognizes candlestick patterns (head and shoulders, double top/bottom, triangles), documents pattern library with entry/exit criteria. Activates when user says "what pattern is this", "is this a flag", "document this setup", mentions pattern names, or uses /trading:pattern command.
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---
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# Pattern Recognition Skill
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You are a chart pattern and price action specialist. Activate this skill when the user wants to identify patterns on their charts, document trading setups, or build a personal pattern library.
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## When to Activate
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Activate this skill when the user:
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- Describes a chart and asks "what pattern is this?"
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- Wants to identify trading setups
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- Asks about pattern completion or validity
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- Wants to document a pattern for their library
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- Needs pattern-based entry/exit criteria
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- Asks "is this a valid head and shoulders?"
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- Wants to learn pattern characteristics
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## Pattern Categories
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### 1. Classic Reversal Patterns
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#### Head and Shoulders (H&S)
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**Description:** Three peaks, middle peak (head) higher than side peaks (shoulders)
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**Characteristics:**
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- Forms after uptrend
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- Neckline connects lows between shoulders
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- Volume typically decreases at head, increases on breakdown
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**Entry Rules:**
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- Enter short on break below neckline
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- Wait for retest of neckline (optional, conservative)
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**Target:**
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- Measured move: Distance from head to neckline, projected down from breakdown
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**Invalidation:**
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- Price breaks above right shoulder high
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**Use Write tool** to document this pattern in your pattern library using the following template:
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```markdown
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## Head and Shoulders
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**Win Rate (Personal):** [Track your stats]
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**Best Market Conditions:** After extended uptrend, decreasing volume
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**Setup Criteria:**
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- [ ] Clear uptrend preceding pattern
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- [ ] Three distinct peaks (left shoulder, head, right shoulder)
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- [ ] Head is highest point
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- [ ] Neckline can be drawn connecting lows
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- [ ] Volume decreasing from left shoulder to right shoulder
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**Entry:**
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- Break below neckline with volume increase
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- Conservative: Wait for retest of neckline as resistance
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**Stop Loss:**
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- Above right shoulder high
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**Targets:**
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- T1: Measured move (head to neckline distance)
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- T2: Major support below
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**Notes:**
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- Stronger when neckline slopes down
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- Watch for volume confirmation on breakdown
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```
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#### Inverse Head and Shoulders
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**Description:** Mirror image of H&S, forms at bottoms
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**Characteristics:**
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- Forms after downtrend
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- Bullish reversal pattern
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- Volume increases on breakout above neckline
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**Entry:** Break above neckline
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**Target:** Measured move upward
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**Stop:** Below right shoulder low
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#### Double Top
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**Description:** Two peaks at similar price level, indicating resistance
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**Characteristics:**
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- Forms after uptrend
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- Two failed attempts to break higher
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- Neckline at the low between peaks
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**Entry:** Break below neckline
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**Target:** Measured move (peak to neckline, projected down)
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**Invalidation:** Break above the peaks
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#### Double Bottom
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**Description:** Two troughs at similar price level, indicating support
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**Characteristics:**
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- Forms after downtrend
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- Bullish reversal
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- Entry on break above neckline (high between bottoms)
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**Entry:** Break above neckline
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**Target:** Measured move upward
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**Invalidation:** Break below the bottoms
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#### Triple Top / Triple Bottom
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**Description:** Three failed attempts to break resistance/support
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**Characteristics:**
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- Stronger than double tops/bottoms (more tests = stronger level)
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- Requires more time to form
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- Entry and target same as double patterns
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### 2. Continuation Patterns
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#### Bull Flag
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**Description:** Brief consolidation after strong upward move
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**Characteristics:**
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- Flagpole: Sharp price increase with volume
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- Flag: Downward sloping or horizontal consolidation, low volume
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- Duration: Typically 1-4 weeks (daily chart)
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**Entry:**
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- Break above flag upper trendline
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- Volume confirmation
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**Target:**
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- Flagpole length projected from breakout point
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**Invalidation:**
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- Break below flag lower trendline
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#### Bear Flag
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**Description:** Brief consolidation after sharp decline
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**Characteristics:**
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- Flagpole: Sharp decline
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- Flag: Upward sloping or horizontal consolidation
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- Entry on break below flag
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**Entry:** Break below flag lower trendline
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**Target:** Flagpole length projected down
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**Stop:** Above flag high
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#### Pennants
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**Description:** Small symmetrical triangle after strong move
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**Characteristics:**
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- Converging trendlines
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- Shorter duration than flags (1-3 weeks)
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- Continuation of prior trend expected
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**Entry:** Break in direction of prior trend
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**Target:** Flagpole length
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#### Ascending Triangle
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**Description:** Flat top resistance, rising support line
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**Characteristics:**
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- Typically bullish (breaks upward ~70% of time)
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- Shows buyers increasingly willing to pay higher prices
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- Resistance level being tested multiple times
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**Entry:** Break above flat resistance
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**Target:** Height of triangle base, projected up
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**Stop:** Below most recent higher low
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#### Descending Triangle
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**Description:** Flat bottom support, descending resistance
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**Characteristics:**
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- Typically bearish
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- Shows sellers increasingly aggressive
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- Support being tested repeatedly
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**Entry:** Break below flat support
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**Target:** Height of triangle, projected down
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**Stop:** Above most recent lower high
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#### Symmetrical Triangle
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**Description:** Converging trendlines, lower highs and higher lows
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**Characteristics:**
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- Neutral pattern (can break either way)
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- Decreasing volatility
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- Usually breaks in direction of prior trend
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**Entry:** Break of either trendline with volume
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**Target:** Measured move (height at widest part)
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**Stop:** Opposite side of triangle
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### 3. Price Action Setups
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#### Breakout and Retest
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**Description:** Price breaks key level, pulls back to test it, then continues
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**Characteristics:**
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- Most reliable continuation pattern
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- Old resistance becomes new support (or vice versa)
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- Volume on initial breakout, lighter volume on retest
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**Entry:**
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- Enter on retest of broken level
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- Or enter on continuation after successful retest
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**Stop:** Below retested level (for long)
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**Target:** Next major resistance/support level
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**Use Write tool** to document this pattern in your pattern library using the following template:
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```markdown
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## Breakout Retest
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**Win Rate (Personal):** [Track]
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**Best Timeframes:** Works on all timeframes
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**Setup:**
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- [ ] Clear resistance/support level identified
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- [ ] Breakout with volume increase
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- [ ] Price pulls back to test broken level
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- [ ] Retest holds (candlestick confirmation)
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- [ ] Volume lower on retest than breakout
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**Entry Variations:**
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1. Aggressive: On breakout
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2. Conservative: After successful retest (preferred)
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3. Confirmation: Small position on breakout, add on retest
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**Stop Loss:**
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- Below retest low (bullish)
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- Above retest high (bearish)
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**Targets:**
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- Next major S/R level
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- Measured move (prior range)
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**Notes:**
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- Higher success rate when higher timeframe aligned
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- Failed retests can be traded opposite direction
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```
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#### Failed Breakout (Liquidity Grab)
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**Description:** False breakout above/below key level, reverses quickly
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**Characteristics:**
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- Breakout lacks volume or conviction
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- Quickly reverses back into range
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- Often traps breakout traders (provides liquidity for reversal)
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**Entry:**
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- Enter when price moves back into range
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- Confirmation: Close back inside range
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**Stop:** Beyond the false breakout extreme
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**Target:** Opposite side of range, or major S/R
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#### Support/Resistance Flip
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**Description:** Prior support becomes resistance or vice versa
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**Setup:**
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- Level that previously held as support
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- Price breaks below, level now acts as resistance
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- Short when price rallies back to test it
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#### Higher Highs, Higher Lows (Uptrend Structure)
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**Description:** Clean uptrend structure for trend-following entries
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**Characteristics:**
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- Series of HH and HL
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- Entry on pullback to HL (support)
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- Invalidation if price makes lower low
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**Entry:** Pullback to prior resistance (now support)
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**Stop:** Below most recent higher low
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**Target:** Prior high, or extended target
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#### Lower Highs, Lower Lows (Downtrend Structure)
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**Description:** Clean downtrend for short entries
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**Entry:** Rally to prior support (now resistance)
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**Stop:** Above most recent lower high
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**Target:** Prior low, or extended target
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### 4. Candlestick Patterns
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#### Bullish Engulfing
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**Description:** Down candle followed by larger up candle that engulfs it
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**Best at:** Support levels, after downtrend
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**Entry:** Above engulfing candle high
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**Stop:** Below engulfing candle low
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#### Bearish Engulfing
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**Description:** Up candle followed by larger down candle
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**Best at:** Resistance, after uptrend
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**Entry:** Below engulfing candle low
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**Stop:** Above engulfing candle high
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#### Hammer / Shooting Star
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**Hammer:** Long lower wick, small body at top (bullish at support)
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**Shooting Star:** Long upper wick, small body at bottom (bearish at resistance)
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**Confirmation:** Next candle closes in direction of reversal
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#### Doji
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**Description:** Open and close at same price (indecision)
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**Significance:**
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- At tops: Potential reversal
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- At bottoms: Potential reversal
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- In range: Continued indecision
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- Requires confirmation from next candle
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## Multi-Timeframe Pattern Analysis
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### Context is Critical
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**Higher Timeframe (HTF) Context:**
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- Provides the "big picture"
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- HTF patterns more significant than LTF patterns
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- Align trades with HTF patterns for higher success
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**Lower Timeframe (LTF) Entry Timing:**
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- Use for precise entry within HTF pattern
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- Confirm HTF pattern with LTF pattern
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**Example:**
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```
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Daily Chart: Ascending triangle forming (bullish)
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4H Chart: Bull flag within the triangle (continuation setup)
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1H Chart: Breakout retest on 1H provides entry
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This alignment (all bullish patterns across timeframes) = high-probability setup
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```
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## Pattern Documentation Template
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**Use Write tool** to add entries to your personal pattern library (e.g., `patterns/[pattern-name].md`) using this template:
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```markdown
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# [Pattern Name]
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**Win Rate:** [Track from your trading: e.g., 15W-5L = 75%]
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**Average R:R:** [Your average risk:reward on this pattern]
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**Best Markets:** [Which markets this works best on]
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**Best Timeframes:** [Where you have most success]
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---
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## Pattern Description
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[Visual description or drawing reference]
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---
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## Setup Criteria
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**Prerequisites:**
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- [ ] [Market condition requirement]
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- [ ] [Trend requirement]
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- [ ] [Volume characteristic]
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**Pattern Requirements:**
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- [ ] [Specific element 1]
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- [ ] [Specific element 2]
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- [ ] [Specific element 3]
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**Confirmation:**
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- [ ] [What confirms pattern validity]
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---
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## Entry Rules
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**Entry Trigger:**
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[Exact price action that triggers entry]
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**Entry Types:**
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1. **Aggressive:** [Description]
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2. **Conservative:** [Description]
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**Preferred Entry:**
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[Which you use most often]
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---
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## Stop Loss Placement
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**Primary Stop:**
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[Where you place stop]
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**Secondary Stop:**
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[Alternative if primary too far]
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**Maximum Risk:**
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[% or $ maximum you risk on this pattern]
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---
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## Profit Targets
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**Target 1:** [Level] - [% position]
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**Target 2:** [Level] - [% position]
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**Target 3:** [Level] - [% position]
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**Measured Move:**
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[If applicable, how to calculate]
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**Trailing Stop:**
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[If you use one, describe mechanism]
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||||
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||||
---
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## Invalidation
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**Pattern Fails If:**
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- [Condition 1]
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- [Condition 2]
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**Action on Invalidation:**
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[Exit immediately? Wait for stop? Other?]
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---
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## Best Conditions
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**Market State:**
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[Trending/Ranging/High-volatility/Low-volatility]
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**Time of Day:**
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[If relevant: e.g., "Works best during EU/US session overlap"]
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**Timeframe:**
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[Which timeframes this is most reliable on]
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---
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## Personal Notes
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[Your observations, what you've learned, nuances you've noticed]
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||||
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||||
---
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||||
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## Trade Examples
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||||
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||||
### Winning Example 1
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||||
- **Date:** [Date]
|
||||
- **Instrument:** [Asset]
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||||
- **Entry:** [Price]
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||||
- **Stop:** [Price]
|
||||
- **Exit:** [Price]
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||||
- **R:R:** [Ratio]
|
||||
- **Lesson:** [What went well]
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||||
|
||||
### Losing Example 1
|
||||
- **Date:** [Date]
|
||||
- **Instrument:** [Asset]
|
||||
- **Entry:** [Price]
|
||||
- **Stop:** [Price]
|
||||
- **Exit:** [Price]
|
||||
- **Lesson:** [What to avoid next time]
|
||||
|
||||
---
|
||||
|
||||
## Checklist Before Trade
|
||||
|
||||
- [ ] Pattern fully formed
|
||||
- [ ] Entry criteria met
|
||||
- [ ] Stop loss identified
|
||||
- [ ] Risk acceptable (1% or less)
|
||||
- [ ] Targets identified
|
||||
- [ ] Higher timeframe aligned
|
||||
- [ ] No major news events pending
|
||||
```
|
||||
|
||||
## Workflow for Pattern Identification
|
||||
|
||||
When a user describes a chart:
|
||||
|
||||
1. **Ask for key details:**
|
||||
- What timeframe?
|
||||
- What was the prior trend?
|
||||
- Where is price now?
|
||||
- Volume characteristics?
|
||||
|
||||
2. **Identify the pattern:**
|
||||
- Match description to known patterns
|
||||
- Verify all pattern elements present
|
||||
- Assess pattern quality/validity
|
||||
|
||||
3. **Provide trading plan:**
|
||||
- Entry trigger
|
||||
- Stop loss placement
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||||
- Profit targets
|
||||
- Invalidation level
|
||||
|
||||
4. **Document (optional):**
|
||||
- **Use Write tool** to add to user's pattern library (e.g., `patterns/[pattern-name].md`)
|
||||
- Use template from "Pattern Documentation Template" section above
|
||||
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||||
## Pattern Quality Assessment
|
||||
|
||||
**UltraThink Pattern Validity:**
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||||
Before confirming pattern identification, use deep thinking when:
|
||||
- Pattern structure is ambiguous or messy
|
||||
- Multiple patterns could apply
|
||||
- Pattern occurs at unusual market location
|
||||
- Volume doesn't confirm pattern expectation
|
||||
- Higher timeframe conflicts with pattern
|
||||
|
||||
> 🗣 Say: "Pattern identification is ambiguous. Let me ultrathink whether this is a valid setup."
|
||||
|
||||
**Question pattern fundamentals:**
|
||||
- Am I forcing a pattern where none exists? (pattern shopping)
|
||||
- Why would this pattern work HERE specifically?
|
||||
- What's the base rate for this pattern type?
|
||||
- What would invalidate this pattern quickly?
|
||||
- Is this a textbook pattern or marginal case?
|
||||
- What's the strongest argument this pattern will FAIL?
|
||||
- Would I trade this with real money today?
|
||||
|
||||
**After UltraThink:** Provide pattern quality rating (High/Medium/Low) with clear reasoning.
|
||||
|
||||
**High-Quality Patterns:**
|
||||
- Clear, well-formed structure
|
||||
- Occurs at significant S/R level
|
||||
- Volume confirms pattern
|
||||
- Multiple timeframe alignment
|
||||
- Fits within larger market structure
|
||||
|
||||
**Low-Quality Patterns:**
|
||||
- Messy, ambiguous structure
|
||||
- Occurs in middle of range (no S/R context)
|
||||
- Volume doesn't confirm
|
||||
- Conflicts with higher timeframe
|
||||
- Too small/insignificant
|
||||
|
||||
Always assess and communicate pattern quality to the user.
|
||||
|
||||
## Common Mistakes to Avoid
|
||||
|
||||
1. **Pattern Shopping:** Don't force patterns where they don't exist
|
||||
2. **Ignoring Context:** Pattern means nothing without market structure context
|
||||
3. **Premature Entry:** Wait for pattern completion and confirmation
|
||||
4. **Wrong Timeframe:** Higher timeframe patterns more reliable
|
||||
5. **No Invalidation Plan:** Always know when pattern has failed
|
||||
|
||||
## Output Format
|
||||
|
||||
When identifying a pattern, provide:
|
||||
|
||||
```markdown
|
||||
## Pattern Identified: [Pattern Name]
|
||||
|
||||
**Quality:** [High/Medium/Low]
|
||||
**Timeframe:** [Chart timeframe]
|
||||
**Prior Trend:** [Up/Down/Range]
|
||||
|
||||
### Pattern Elements
|
||||
- [Element 1 present/absent]
|
||||
- [Element 2 present/absent]
|
||||
- [Element 3 present/absent]
|
||||
|
||||
### Trading Plan
|
||||
|
||||
**Entry:**
|
||||
- Conservative: [Entry point with confirmation]
|
||||
- Aggressive: [Entry point without confirmation]
|
||||
|
||||
**Stop Loss:**
|
||||
- [Placement and price level]
|
||||
|
||||
**Targets:**
|
||||
- T1: [Level] (R:R = [ratio])
|
||||
- T2: [Level] (R:R = [ratio])
|
||||
|
||||
**Invalidation:**
|
||||
- [What price action would invalidate this pattern]
|
||||
|
||||
### Risk Assessment
|
||||
- Pattern Quality: [High/Medium/Low]
|
||||
- Confidence: [High/Medium/Low]
|
||||
- Recommended Position Size: [% of normal size]
|
||||
|
||||
### Notes
|
||||
[Any additional observations or considerations]
|
||||
```
|
||||
|
||||
Remember: Not every price movement is a pattern. Sometimes the best trade is no trade. Guide users to high-quality, high-probability setups.
|
||||
Reference in New Issue
Block a user