With time (and many money wasted) I found some patterns that, statistically speaking, tend to work the most. In this separate section therefore, you’ll find a complete explanation with the ones that I think you should be eyeing during your crypto journey. Over time, this section will be constantly expanded with the aim of creating a bigger database. A side but important note: remember that patterns are more powerful if applied on HTFs rather than LTFs.

I. Head & Shoulders

The head and shoulders is a technical pattern mostly used for identifying a trend reversal, that's why I like it very much. Statistically, is one of the most accurate price action patterns, with a 85% success rate.

This pattern can be divided in 2 :

Classic H&S (Trend switches from bullish to bearish)
Inverted H&S (Trend switches from bearish to bullish)

During a bullish trend:

The price creates a high (left shoulder)
Makes a pullback (PB1)
Rise again creating a new high (head)
Makes another pullback (PB2)
Tries to come back to the previous high but the bullish pressure runs out of steam (RS)

This is a classic H&S that flashes a potential bullish to bearish reversal.

About the neckline: it's a line that must be drawn starting from the PB1 passing through the PB2 and it becomes our watershed to determine the shift in trend. To validate a strong bearish reversal we start looking for HTF breaks of the neckline (look at the strength of the candle) preferably supported by volumes.

Let’s see a concrete example by considering the chart of POND:

This one is a clear representation of a regular H&S with both shoulders almost at the same level. The neckline starts from the first pullback (yellow circle) completing the left shoulder (LS), and becomes the key level to assess the development of the pattern. As a general rule, both shoulders should be pretty similar, even if sometimes we can find price actions with the right shoulder slightly higher than the left one or vice-versa.

This would not invalidate the pattern as long as one of the shoulders don’t exceed the head.

As said, the POND example presents a regular H&S formation with a flat neckline. But a H&S can also develop by following a downtrend or an uptrend, therefore presenting a descending or a rising neckline. Here’s an example considering MATIC:

As you can see, we have a rising neckline but the substance doesn’t change with MATIC forming a perfect H&S with almost regular shoulders.

The first sign of confirmation is given by the break of the neckline on HTFs with a daily candle, completely confirmed later when we had the closure below the SL, leading to a reversal.

The same “reversal concept” happens when we have the Inverse head & shoulders (IH&S) with a similar but inverted formation that, contrary to the classic H&S, leads to a bullish reversal.

The price creates a low (left shoulder)
Makes a retrace to the upside (RT1)
Falls again creating a new low (head)
Makes another retrace (RT2)
Tries to come down to the previous low but the bearish pressure runs out of steam (RS)

One of the most emblematic examples of trend reversal was Bitcoin at the start of 2023. As you can see from the chart, in fact, we had:

Prolonged downtrend (bear market)
Formation of the first low (LS)
Retrace to the upside (RT1)
Formation of a new low (H)
Another retrace to the upside (RT2)
Price that tried to come down to the previous low but bearish pressure was weak
Strong weekly breakout above neckline supported by volumes + HTF closure above

Another example could be made with PEPE, which presents a super clean IH&S: You can see that from the break of the neckline (strong one, look at the size of the candle) the price has performed more than 90% over time.

4 simple tips

- Head & Shoulders pattern has a great success rate but isn't law, always make sure to adopt proper risk management

- To validate the pattern, look for HTF and HTF breakout or breakdown of the neckline (candle strength is crucial + confirmation + volumes to avoid fake moves)

- The neckline could be used as a support for pushing higher/lower -> if the price breaks above the last shoulder (RS) the pattern is invalidated

- Add FVGs to the strategy of individuating shoulders as very often the impulse coming from the head generates imbalances that will be filled, tending to generate the shoulder

Targets

For targets, you should use the Fibonacci retracements tool. Let’s pick up again the PEPE example: to individuate a logical target, I used the same Fib extension set up I shown you in the Fibonacci guide (go check it if you didn’t yet), therefore drawing it from the SH to the SL which approximately correspond to the left shoulder and the head of the pattern.

This will put the target/take profit area between 1.272 and 1.618 with 1.454 as intermediate level. As you can see, the TP area for PEPE has been almost perfect, with the price shooting above the box but ending to reverse slightly after.

It is not important to catch 100% of the move, the important is to be profitable. The same concept could be applied for the classic H&S.

II. Harmonic Patterns

And here we have 2 of the most valuable patterns present in the market: the ABCD correction and the 3 drives pattern. Both are part of the harmonic patterns category, which comprises a wide “selection” of the most used in trading. Let’s start with the first, as it’s the base to understand the second one.

1. The ABCD Pattern

Technically speaking, the ABCD is a three-wave correction, after which the price movement towards the main trend can continue. In the chart here you can see the Bearish A-B-C-D on the left, where the D point marks the start of a bearish impulse, while on the right you can find the Bullish A-B-C-D where again, the D point marks the start of a bullish impulse. This is how at first attempt they appear, but they cannot be drawn “casually” as they have specific rules that must be respected in order to validate these patterns.

Their characteristics could be summarized in 4 steps:

A to B is of course the first impulse in the pattern
B to C is a 61.8/78.6% of the Fibonacci retracement of A to B
C to D is the final wave and it is an expansion of 127.2-161.8% Fibonacci from the B to C impulse and should be roughly equal to the A to B impulse
D is the last point of the pattern, and once it has been formed, the price usually reverses

Example. Take a look at this Bearish A-B-C-D correction:

I started drawing the Fibonacci from the swing low (point A) to the swing high (point B) obtaining our point C toward the 0.618. From the point B instead, I drew the Fibonacci to the point C, obtaining an extension of 1.272 which constitutes our point D.

In terms of length, the time it takes to go from point A to point B should be equal or similar to the one from point C to point D. These characteristics contribute to validate the pattern.

The same theory applies for the Bullish A-B-C-D correction:

-The A to B point with the Fibonacci, obtaining the C point at 0.618

-The B to C instead, provides us the D point, which is the 1.272 extension

Again, the time spent from A to B is the same as for C to D (but could be similar) showing 44 days.

Let’s bring out some charts. This is an example of Bullish A-B-C-D on FLOKI.

The Fibonacci drew from A to B was the base to calculate the C point which, as you can see, matches the 0.618 with the body of the candles. From the B point to the C point I drew another Fibonacci obtaining the D point which is the perfect 1.272 extension. Both moves are very similar in terms of time.

That level marked the bottom of the corrective move for FLOKI leading to a reversal that brought to a +140% over time.

Here instead we have the Bearish example:

Same Fibonacci method previously mentioned with the the C point being the 0.618 and the D point instead, being the 1.272.

The time from A to B and from C to D isn’t “perfect” but very similar, with respectively 4 and 6 days, which is acceptable.

A few things to add:

Some traders for the C point utilize the 0.786 and for the D point the 1.618 as valid, which is not wrong, but I prefer to use 0.618 and 1.272 respectively.
You can find multiple A-B-C-D corrections inside a bigger trend but their reliability is way less significant compared to A-B-C-D found on higher timeframes such as daily and weekly
The price doesn’t have to perfectly match the Fib levels, it’s enough for the asset to get close to those levels.

2. 3 Drives Pattern

This analysis on the A-B-C-D correction pattern and its dynamics is the basis to understand the “step 2” of this guide: The 3 drives pattern. Technically speaking, it’s very similar to the previous formation but it involves three distinct moves (drives) in the same direction followed by a reversal.

Here we have the Bearish 3 drives pattern:

There are essentially 5 legs that form the pattern, where A + B are the 0.618 or 0.786 Fibonacci retracement level, while the extensions from 1 to A to obtain the 2 peak and the one from 2 to B to obtain the peak 3 correspond to the 1.272 or 1.618. Again, as for the A-B-C-D correction, the time necessary to form each drive must be equal or very similar (it can span more but the more time passes and the more the risk of invalidation) in this context is approximately of 35 days.

I suggest drawing 2 trendlines that cover the highest and lowest points in order to form a channel that will be useful to gauge the pattern’s symmetry.

Talking about the highest points, the third peak is the one that leads to reversal and the one that usually provide a false perception for many retails as they think the market will continue to trend higher.

Technically speaking, the trendline that passes through the peaks helps assess a potential breakdown since the price, when ready to perform a reversal, will likely close HTF below that line.

The same rules apply to the Bullish 3 drives pattern:

The A mark is the 0.618 calculated by drawing the Fibonacci retracement from the starting point to the 1, as well as the B point calculated from A to 2. Point 2 and 3 are the 1.272 or 1.618 extensions calculated from 1 to A and from 2 to B respectively.

Even in this case, the time that passes from the creation to each drive to another, is equal or similar, with 23 days in this hypothetical case.

But it’s everything easy if we draw the technicalities by ourselves, right?

So let’s apply the theory directly on the charts, to see if it concretely works.

This is the daily chart of RSR showing an almost perfect Bearish 3 drives:

The rules are perfectly applied on the pattern:

From the SL to the point 1, we obtain the point A → 0.618
From the point 1 to the point A, we obtain the point 2 → 1.272 (didn’t draw the Fibonacci in order not to induce too much confusion, but you can do it by yourself to check it out)
From point A to the point 2, we obtain the point B → 0.618
From the point 2 to the point B, we obtain the point 3 → it goes up till 1.618, still valid

The time spent to create each drive is almost similar, with the first drive that forms in 22 days, the second one in 18 days and the third one in 8 days.

“But mate, 22 days and 18 days are a similar time span, but not 8 days..”

I know, but finding perfect timelines in patterns is very difficult, the important part is that the potential discrepancy will not be so large (ex 1/2 month) so everything must be contextualized. As you can see, the 3rd drive breaks above the trendline giving a fake perception of continuation to market participants but ends up closing below and, after an underside retest, proceeds its downward movement, marking the reversal.

Important take

Usually, each drive is higher than the previous one as the sequence is a macro HH + HL formation in a bearish 3 drives pattern and each drive is lower than the previous one as the sequence is a macro LH + LL in a bullish 3 drives, but..not always. There might be instances in which the second drive could be higher/lower than the third drive but this wouldn’t invalidate the pattern. The important is to respect the Fibonacci levels and the time necessary to form the drives.

III. Wolfe Waves

This is a pattern that seems very similar to the previous ones, but differentiate itself for a few things and it’s a great addition in your armory as I severely backtested it over time, proving its effectiveness. Wolfe Waves are essentially compression patterns notable from one main variable: momentum, which as you know refers to the speed and strength of a price movement over time. (see related Notion section here : Supply & Demand | Dominance & Momentum | Premium, Discount & Equilibrium ).

In the example below, I presented the pattern for both the bullish and the bearish scenario:

As you can see, the similarities with the A-B-C-D pattern and the 3-drives one are clear, visually speaking. Wolfe Waves represent a structured set of multiple Elliott Waves, characterized by a five-wave formation that follows a natural rhythm in price action.

These waves develop within a supply and demand framework and are recognized for their ability to forecast strong reversals.

The pattern is deeply rooted in market dynamics, with liquidity plays and imbalance phases driving price movements, and going on with the reading you’ll understand why.

A Bullish Wolfe Wave forms through a sequence of lower highs and lower lows, where the 1st and 3rd waves create the foundation by establishing dynamic liquidity. This phase essentially qualifies the initial waves, while the 4th and 5th waves play a crucial role in confirming the imbalance phase. In Wyckoff terminology, this stage can be seen as a UTAD or a Spring, concepts that describe the final liquidity grab before a directional move. The 5th wave is particularly significant because it serves as the ultimate stop run, designed to absorb liquidity beneath the trendline. This final shakeout is what fuels the bullish move, as the market rebalances through the ROV (Return on Value) phase. The ROV phase typically occurs at a demand zone or an order block, offering an optimal entry point for people who are aware of the mechanics behind liquidity grabs and market structure shifts, something we saw plenty of times in the Notion.

In contrast, a Bearish Wolfe Wave follows the opposite pattern, forming a sequence of higher highs and higher lows. Instead of a stop run below the trendline, the price deviates above it to attract liquidity before reversing downward. This deviation functions as a trap, drawing in breakout traders who expect continuation but are instead met with a sharp price reversal. The price then returns to retest the supply zone or the previously established order block, mirroring the ROV phase in the bullish scenario. Once the market confirms that liquidity has been gathered, an impulsive downward move follows, completing the pattern.

For a Wolfe Wave to be considered valid, certain conditions must be met:

The waves should maintain a steady rhythm, cycling at regular intervals, which ensures that the structure is not distorted by erratic price action.
The third and fourth waves must remain confined within the range defined by the first and second waves, maintaining structural integrity.
Symmetry is essential: waves 3 and 4 should closely reflect the proportions of waves 1 and 2, preserving the natural balance of the pattern. Most importantly, the 5th wave must extend beyond the trendline that connects the 1st and 3rd waves. If the 5th wave fails to do so, the pattern is incomplete and lacks the liquidity grab necessary to fuel a strong reversal.

What makes Wolfe Waves particularly compelling is their potential for a highly favorable R/R ratio. After extensive backtesting over several months, it has become evident that positioning entries within the ROV phase can lead to significant profit potential. The first primary target is the EPA (Estimated Price at Arrival), which is determined by drawing a line from point 1 through point 4. This projected price level serves as a highly probable destination for the price once the reversal is in motion.

The uniqueness of this pattern lies in its statistical reliability. According to available data from the forex market, well-formed Wolfe Waves (those that exhibit clear symmetry, adhere to the expected timing, and align with liquidity principles) have a success rate of approximately 60% to 80% in reaching the EPA.

On the other hand, Wolfe Waves that are poorly structured or incomplete tend to have a much lower probability of achieving the projected price target, with success rates dropping to around 40% to 50%.

The key to maximizing the potential of Wolfe Waves is recognizing when they form within strong demand or liquidity zones. If the pattern aligns with a significant OB or an area where institutional interest is evident, the probability of a successful reversal increases substantially.

This allows you to achieve an optimal R/R, often around 1:3.

The first TP level is set at the EPA, ensuring that the trade secures a return that offsets any potential stop-loss.

A second TP instead, can then be aimed at the formation of a new high, further increasing the overall return potential.

You can see what I’m talking about in the example on the right.

An additional insight that strengthens the validity of Wolfe Waves comes from Fibonacci. By applying Fibonacci retracements from 1 four to point 5, it becomes crystal clear that the EPA often aligns with the 127.20% to 145.40% extension range, as I shown you in the Fib settings.

This confluence reinforces the idea that the Wolfe Wave pattern is not only rooted in market structure but also follows natural harmonic price movements.

- BTC example -

Here you can see a clear example of the price action forming well-defined Wolfe Waves, structured through the sequence 0 → 1 → 2 → 3 → 4 → 5. The development of this wave cycle followed the textbook formation, with precise liquidity dynamics driving each stage of the pattern. As the price progressed through these waves, we can observe a clean displacement above the previous supply zone, effectively running stops and triggering a liquidity sweep.

This critical phase is evident in the 5th wave, which extended beyond the trendline connecting points 1 and 3.

This deviation above the trendline serves as a crucial characteristic of a valid Wolfe Wave pattern, signaling the final liquidity grab before the reversal. The moment price extends beyond the 1–3 trendline, it effectively induces breakout traders and late buyers into the market, luring them into positions that will ultimately be used as fuel for the move in the opposite direction. This liquidity “collection” mechanism is a fundamental aspect of market structure, ensuring that there is enough order flow to facilitate the reversal.

Following this stop run, we enter the ROV phase, where price retraces back into a significant supply zone, OB, or imbalance area. This retracement provides an ideal entry opportunity, as it aligns with the concept of price efficiency, returning to areas of previous institutional activity before continuing in the intended direction, the classic dynamic. In this particular case, the ROV phase was clean and well-defined, offering a precise short entry opportunity before the bearish continuation unfolded.

As expected in a properly structured Wolfe Wave, the price continued to decline towards the main target, the EPA. This EPA level is derived by projecting a trendline connecting points 1 and 4, establishing the anticipated price level where the wave sequence is likely to complete. The significance of the EPA lies in its role as a natural equilibrium point where price seeks to rebalance after the liquidity manipulation phase is complete. Bitcoin, in particular, has shown a tendency to produce numerous Wolfe Wave structures over time, that’s why I talked about a severe backtest.