Chart patterns are shapes in price that traders have named and traded for a century: the double top and double bottom, the head and shoulders, flags and pennants, triangles, wedges. Each comes with a story about what it means and a rule for the trade that follows.
The common ones
A double top is two peaks at about the same level with a trough between, read as a failure to break higher and traded short on a break below the trough. A head and shoulders is three peaks with the middle one highest, read the same way and traded on a break of the neckline joining the two troughs. A flag is a brief, tidy consolidation against the direction of a strong move, traded on a break in the original direction. A triangle is a narrowing range, traded on the break of whichever side gives way.
The definition problem
Every one of these depends on judgement. How close must the two tops be? How long may the flag last? Where exactly is the neckline? Two experienced traders shown the same chart will name different patterns, and the same trader will name them differently after the outcome is known. A pattern that is recognised in hindsight is not a rule that can be traded in advance, and a pattern that has been turned into a strict rule is usually a different thing from the one in the books.
That is why chart patterns are rarely found in systematic strategies. Not because the shapes are meaningless, but because a mechanical definition either misses most of what a human would call the pattern or triggers on far more than a human would accept, and neither version has shown a reliable edge under real costs. Where systematic research has examined strictly defined patterns, the results have been mixed at best, and the ones that appear to work tend to be indistinguishable from simpler breakout rules.
A trader codes a double-top rule: two highs within 0.2 per cent of each other, at least ten bars apart, with a trough at least 1 per cent below, entering short on a close below the trough. On five years of EUR/USD hourly data the rule finds 214 patterns. A trader reviewing the same chart by eye identifies 31, of which the code caught 19. The two are not measuring the same thing, and neither set of trades is profitable after costs.
An EA that describes itself as trading chart patterns is trading a mechanical rule the developer chose, and the rule is what should be assessed, on the live record, like any other. Pattern names on a sales page are a story, and the trade list is the evidence. Where a system's edge is real, it is usually describable in plainer terms, a breakout of a range, a pullback in a trend, and the pattern vocabulary adds nothing to the test.