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Summary Cheat Sheet: Top Forex Reversal Patterns That Every Trader Should Know

This document discusses several important forex reversal patterns that traders should be aware of. It outlines both bearish and bullish reversal patterns, including the Doji candlestick, Hammer candlestick, shooting star, engulfing pattern, double top, double bottom, head and shoulders, and inverted head and shoulders patterns. It notes that these patterns can help forecast high probability reversal zones and should be traded when pattern confirmation occurs.

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466 views

Summary Cheat Sheet: Top Forex Reversal Patterns That Every Trader Should Know

This document discusses several important forex reversal patterns that traders should be aware of. It outlines both bearish and bullish reversal patterns, including the Doji candlestick, Hammer candlestick, shooting star, engulfing pattern, double top, double bottom, head and shoulders, and inverted head and shoulders patterns. It notes that these patterns can help forecast high probability reversal zones and should be traded when pattern confirmation occurs.

Uploaded by

sselvaraj109613
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Summary Cheat Sheet: Top Forex Reversal Patterns that Every Trader Should Know

 Forex reversal patterns are on chart formations which help in forecasting high probability reversal
zones

 There are basic two types of trend reversal patterns; the bearish reversal pattern and the bullish
reversal pattern.

 The Doji candle is one of the most popular candlestick reversal patterns and it’s structure is very
easy to recognize. First, the Doji is a single candle pattern

 The Doji candlestick is typically associated with indecision or exhaustion in the market. When it
forms after a prolonged trend move, it can also provide a strong reversal potential.

 The Hammer Candlestick pattern is another single candle which has a reversal function. This candle
is known to have a very small body, a small or non-existent upper shadow, and a very long lower
shadow.

 The Hammer pattern is only considered a valid reversal signal if the candle has appeared during a
bearish trend

 The shooting star candle comes after a bullish trend and the long shadow is located at the upper
end. The shooting star pattern would signal the reversal of an existing bullish trend.

 The engulfing formation consists of an initial candle, which gets fully engulfed by the next
immediate candle. This means that the body of the second candle should go above and below the
body of the first candle.
 The Double Top pattern consists of two tops on the price chart. These tops are either located on
the same resistance level, or the second top is a bit lower. This pattern typically looks like the letter
“M”.

 The Double Top has its opposite, called the Double Bottom. This pattern consists of two bottoms,
which are either located on the same support level, or the second bottom is a bit higher. This
pattern typically looks like the letter “W”.

 The Head and Shoulders pattern forms during a bullish trend and creates a top - the first shoulder.
After a correction, the price action creates a higher top – the head. After another correction, the
price creates a third top, which is lower than the head – the second shoulder. So we have two
shoulders and a head in the middle.

 Head and Shoulders reversal pattern has its upside down equivalent, which turns bearish trends
into bullish. This pattern is referred to as an Inverted Head and Shoulders pattern.

 When trading classical patterns, you would want to open a trade when you get a pattern
confirmation and to hold for at least the minimum price projection based on the structure of the
pattern.

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