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October 24, 2017

Question:What is "Reversal patterns"? How can I define the moment of reversing trend?

Answer:

Reversal patterns indicate that a reversal in trend is taking place.

Reversal patterns:

  1. Existence of prior trend
  2. First signal of an impending trend reversal is the breaking of an important trendline
  3. The larger the pattern, the greater the subsequent move
  4. Topping patterns are usually shorter in duration and more volatile than bottoms
  5. Bottoms have usually smaller price ranges and take longer to build
  6. Volume is usually more important on the upside

Most common reversal patterns:

  • Head and Shoulders
  • Double tops and bottoms
  • Triple tops and bottoms
  • Spike (or V) tops and bottoms
  • Ascending and Descending Wedge

For more information and explanation with screenshots, please visit XM’s official website and proceed to “Forex Education” → “Forex Education – Chapter 2” → “Reversal Patterns”.

XM Official Website

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