Though, there is a wide variety of reversal price action patterns.
Here is the list of the classic ones that you must know if you trade technical analysis.
- The head and shoulders pattern is believed to be one of the most reliable trend reversal patterns. It is one of several top patterns that signal, with varying degrees of accuracy, that an upward/downward trend is nearing its end.
The Head and Shoulders pattern has a distinctive appearance which includes a distinct ‘left shoulder’, ‘head’, ‘right shoulder’ and ‘neckline’ formation.
- A double top/bottom is an extremely bearish/bullish price action reversal pattern that forms after a price reaches a high/low two consecutive times with a moderate fluctuation between the two highs/lows. It is confirmed once the price falls below/above a neckline level.
- Ascending/descending triangle is a classic reversal pattern. It signifies the exhaustion of the market. The price sets a sequence of higher lows / lower high and respects the same highs/lows signifying a highly probable forthcoming trend reverse.
The reversal trigger is a breakout of a horizontal neckline.
Do you find these patterns reliable?
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