What is QM Pattern? It indicates the reversal point of the price trend.

In the process of analyzing price movements for trend followers, traders often use a variety of chart patterns. But if asked, What is QM? most people may not be very familiar with this name yet. This is because this pattern is still relatively new in the trading community among investors. However, due to its accuracy in indicating potential trend reversals, the QM Pattern is gaining increasing attention.

Quasimodo Pattern or QM: A Hidden Signal on the Chart

If you recall the story of “The Hunchback of Notre-Dame,” you can imagine that the QM Pattern resembles an asymmetrical M or W shape, similar to the shoulders of that character. The right shoulder will be higher or lower than the left shoulder in a clear manner.

Understanding QM as a pattern similar to Head and Shoulders, but with a key difference: after the formation of the (Head), the subsequent adjustment will break through the neckline quickly, before forming a right shoulder that is not higher or lower than the left shoulder. Then, the price trend will change immediately.

Navigating the Formation of the QM Pattern: Where and When

The QM Pattern typically appears when a trend is about to reverse—either from downtrend to uptrend or from uptrend to downtrend. Therefore, if traders intend to use QM is a tool for investment, they must understand that there are two types:

Bullish QM Pattern: Signals from a downtrend to an uptrend

When a downtrend is about to reverse, the price will start forming new lows (Lower Low) with decreasing trading volume. Then, a strong rebound occurs, breaking through the previous resistance and creating a new high (Higher High). However, the price cannot sustain this level for long, leading to a correction that does not go below the left shoulder. When the price tests this support level and then surges past the previous high, the trend will fully shift to an uptrend.

Bearish QM Pattern: Signals from an uptrend to a downtrend

Conversely, when an uptrend is about to reverse, the price will start forming new highs (Higher High) with decreasing trading volume. Then, a sharp decline occurs, breaking through the previous support and forming a new low (Lower Low). But the price then rebounds and fails to go above the left shoulder. When the price tests this resistance and then drops below the previous low, the trend will fully shift to a downtrend.

The Origin of QM Pattern According to the Dow Theory

Why does QM Pattern work well? It can be explained through the (Dow Theory), which is the foundation of trend trading.

This theory states that price trends will continue until a change signal appears. For example, in an uptrend, prices will form Higher Highs and Higher Lows consistently. When this pattern disappears, it indicates a potential trend reversal.

The QM Pattern operates similarly. It helps identify points where the old trend begins to weaken—when prices create behaviors that contradict the existing trend (by making new lows in an uptrend or new highs in a downtrend), reflecting a tug-of-war between buying and selling forces.

Trading with QM Pattern + Demand Supply Zone

To effectively trade using QM is a chart pattern, it should be combined with the concept of Demand and Supply Zones.

When a Bullish QM Pattern signals the formation of the right shoulder, the price will create a Higher High and then start to decline. That point becomes a Demand Zone, ideal for entering long positions, with stop-loss placed at the head or the previous low.

Similarly, for a Bearish QM Pattern, when the price creates a Lower Low and then rebounds, that point becomes a Supply Zone, suitable for short positions, with stop-loss placed at the head or the previous high.

Cautions When Using the QM Pattern

Although QM Pattern is highly accurate, caution is always necessary. The main issue arises when applying it to assets with low trading volume. In such cases, the pattern may resemble a QM Pattern but is actually controlled by only a few traders, making trading results inconsistent with the theory.

Therefore, before applying QM is a pattern, ensure that the asset has sufficient trading volume so that the pattern reflects real market behavior. Otherwise, you risk falling prey to misinterpretation of the chart.

Summary: QM Pattern as an Opportunity Indicator for Reversal

By now, the question What is QM Pattern should have a clear answer. This pattern is not just a strange shape on the chart but also a combination of the (Dow Theory), supply and demand rules, which help traders identify potential trend reversals.

For trend-following enthusiasts Trend Following, learning about the QM Pattern is a valuable tool. But always remember that no pattern is 100% accurate. Combining it with risk management, market analysis, and backtesting strategies before trading live is the key to success.