Reversal Patterns
Learn to identify patterns that signal potential trend reversals.
What Are Reversal Patterns?
Reversal patterns indicate that the current trend is likely to change direction. They form at market tops (bearish reversals) or bottoms (bullish reversals).
"The bigger the pattern, the bigger the potential move."
>Key Insight
"Reversals require confirmation. Never trade anticipation."
Bullish Reversal Patterns
Bottom Formations
Double Bottom
W-shaped pattern signaling trend reversal
Inverse Head & Shoulders
Strong bullish reversal pattern
Falling Wedge
Converging trendlines sloping downward
Rounding Bottom
U-shaped gradual reversal
Bearish Reversal Patterns
Top Formations
Double Top
M-shaped pattern signaling trend reversal
Head & Shoulders
Classic bearish reversal pattern
Rising Wedge
Converging trendlines sloping upward
Rounding Top
Inverted U-shaped gradual reversal
How to Trade Reversals
1
Identify Pattern
Wait for pattern to fully form
2
Wait for Breakout
Enter on neckline break
3
Confirm Volume
Volume should increase on breakout
4
Set Targets
Target = Pattern height from breakout
Success Tips
- • Look for reversals at key support/resistance
- • Use multiple timeframes for confirmation
- • Check for divergence on RSI/MACD
Common Mistakes
- • Trading before pattern completes
- • Ignoring overall market trend
- • Not waiting for volume confirmation
>Trading Wisdom
"Catching reversals is profitable, but chasing them is dangerous."