Author: Chris Flores, Founder | March 17, 2025
When I first started trading in high school, I was obsessed with finding the "perfect" technical indicator that magical formula that would unlock consistent profits. I tried them all: MACD, RSI, Bollinger Bands, Ichimoku Cloud, and countless custom indicators that promised the moon.
What I eventually discovered was much simpler and more powerful: price action patterns that appear across all markets and timeframes. These patterns work because they represent human psychology in action fear, greed, indecision, and capitulation all leave their marks on charts.
Today, I'm sharing the five patterns that form the foundation of my trading approach and have contributed most to my consistent 27-38% annual returns.
1. The Failed Breakout (Bull Trap)
This pattern occurs when price breaks above a significant resistance level but quickly reverses and falls back below it. Many traders get trapped buying the breakout, creating forced selling as they exit losing positions.
Why it works: Failed breakouts represent a shift in market sentiment. What looked like strength reveals itself as weakness, often leading to sharp moves in the opposite direction.
How I trade it: I wait for a clear breakout above resistance on higher-than-average volume, followed by a close back below the resistance level. My entry is when price confirms the failed breakout, with a stop loss just above the recent high.
Real example: In January 2024, XYZ stock broke above its 6-month resistance at $85, reaching $87.50 before reversing sharply. I entered a short position at $84.70 after confirmation and rode it down to $78 over the next three weeks.
2. The Spring Pattern
This pattern, popularized by Richard Wyckoff, occurs when price briefly penetrates a support level, triggering stop losses, before reversing higher. It represents smart money absorbing selling pressure before marking prices up.
Why it works: It capitalizes on the tendency for retail traders to place stop losses just below obvious support levels, creating liquidity that larger players can use to enter positions.
How I trade it: I look for a quick, sharp move below support followed by an immediate recovery back above that level. I enter when price reclaims the support, with a stop below the spring low.
Real example: Last year, ABC stock had established strong support at $42. In March, it dipped to $41.20 before quickly recovering. I entered at $42.15 and rode it to $48 over the next month.
3. The Inside Bar After Trend
An inside bar occurs when a price bar's high and low are completely contained within the previous bar's range. When this happens after a strong trend move, it often signals a brief consolidation before continuation.
Why it works: Inside bars represent a temporary equilibrium between buyers and sellers, often a "catch your breath" moment before the trend resumes.
How I trade it: After identifying an inside bar in a strong trend, I place orders above (for uptrends) or below (for downtrends) the inside bar, entering only if price breaks in the direction of the trend.
Real example: In December 2024, DEF stock was in a strong uptrend before forming an inside bar at $63.50. I placed a buy order at $64.30 (above the inside bar's high), which triggered the next day. The stock continued to $68 within a week.
4. The First Pullback
After a stock breaks out from a base on strong volume and momentum, the first pullback often presents an excellent entry opportunity with a favorable risk-reward ratio.
Why it works: The first pullback in a new trend often attracts buyers who missed the initial move but still want to participate. Support typically forms around key moving averages or the top of the prior base.
How I trade it: I wait for a 30-40% retracement of the initial move, preferably to a key support level like the 20-day moving average. I look for volume to dry up during the pullback (showing sellers are exhausted) before entering.
Real example: GHI stock broke out from a 3-month base at $25, running to $32 before pulling back to $28.50 (near its 20-day MA). Volume declined during the pullback, and I entered at $29.20 as it started moving up again, riding it to $37.
5. The Opening Range Breakout (ORB)
This intraday pattern focuses on the first 30 minutes of trading. The high and low of this period establish a range, and breakouts from this range often signal the direction of the day's move.
Why it works: The opening range captures the initial reaction to overnight news and often sets the tone for the day. Breakouts from this range frequently lead to momentum in that direction.
How I trade it: I mark the high and low of the first 30 minutes, then wait for a breakout with increasing volume. I enter when price clears the range by a predetermined amount (usually 0.2% for large caps, 0.5% for mid-caps).
Real example: Just last week, JKL stock established an opening range between $47.20 and $48.60. It broke above $48.60 around 10:30 AM with increasing volume, and I entered at $48.75. It climbed to $50.40 by close.
The Blueprint Behind the Patterns
These patterns aren't just random observations they're part of a systematic approach to reading market psychology. What makes them powerful isn't just identifying them, but knowing:
- When they're most likely to work (market conditions)
- How to size positions appropriately
- Where to place stops to minimize risk
- When to take profits
My Trading Blueprint expands on these concepts and provides a complete framework for implementing them in your own trading. It's the system I wish I'd had when I started—one that might have saved me from those early $43,000 in losses.
Your Trading Journey
Which patterns have you found most reliable in your trading? Have you experienced success with any of these five? Share your experiences in the comments below or join our Discord community for deeper discussions on trading patterns and strategy.
Remember: The pattern itself is just the beginning. Your risk management and psychological discipline determine whether that pattern becomes a profitable trade or another learning experience.
—Chris