If you're trading without understanding reversal signals, you're basically flying blind. This chart breaks down 4 proven reversal setups that smart traders use to catch market tops and bottoms before the big moves happen.
Let’s dive into each:
1. Pattern + Breakout (Head & Shoulders)
🧠 Think of this as a classic trap. Price makes a new high (the head) but fails to hold it, forming a lower high (right shoulder).
🔻 Break of neckline = trend change confirmation.
📌 Use case: Spotting weakness at the top of an uptrend.
2. Breakout + LH & LL (Lower High & Lower Low)
🚨 Price makes a lower high after failing to break a previous high.
Once that low breaks? Momentum flips.
🔥 Perfect for early entries into a new downtrend.
📌 Use case: Identifying reversals after a strong move up.
3. New High Fail + Breakout
🎯 When price fails to make a new higher high (HH), that’s your first clue.
Combine that with a strong breakout below key support, and you’ve got confirmation.
👀 Watch for retests – that’s where pros stack entries.
📌 Use case: Catching “bull trap” scenarios before price dumps.
4. Break + Retest
🧱 Support breaks, and price comes back to retest — but can’t reclaim.
That retest + rejection = 🔒 confirmation of reversal.
🕵️♂️ Add volume or candle analysis to strengthen your entries.
📌 Use case: High-confidence setup in trending markets.
🧠 How to Use These Setups in Real Trading:
✅ Wait for structure break
✅ Look for volume confirmation
✅ Place stops above/under the invalidation zone
✅ Be patient — retests give the best risk-reward
📸 Screenshot This. Study It. Use It.
These 4 reversal types are the bread and butter of institutional traders. Learn them, and you'll never chase tops or bottoms again.
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