Reversal patterns indicate that a reversal in trend is taking place.
- Existence of prior trend
- First signal of an impending trend reversal is the breaking of an important trendline
- The larger the pattern, the greater the subsequent move
- Topping patterns are usually shorter in duration and more volatile than bottoms
- Bottoms have usually smaller price ranges and take longer to build
- 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”.