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.
Letโs dive into each:
1. Pattern + Breakout (Head & Shoulders)
๐ง 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).
๐ป Break of neckline = trend change confirmation.
๐ Use case: Spotting weakness at the top of an uptrend.
2. Breakout + LH & LL (Lower High & Lower Low)
๐จ Price makes a lower high after failing to break a previous high.
Once that low breaks? Momentum flips.
๐ฅ Perfect for early entries into a new downtrend.
๐ Use case: Identifying reversals after a strong move up.
3. New High Fail + Breakout
๐ฏ When price fails to make a new higher high (HH), thatโs your first clue.
Combine that with a strong breakout below key support, and youโve got confirmation.
๐ Watch for retests โ thatโs where pros stack entries.
๐ Use case: Catching โbull trapโ scenarios before price dumps.
4. Break + Retest
๐งฑ Support breaks, and price comes back to retest โ but canโt reclaim.
That retest + rejection = ๐ confirmation of reversal.
๐ต๏ธโโ๏ธ Add volume or candle analysis to strengthen your entries.
๐ Use case: High-confidence setup in trending markets.
๐ง How to Use These Setups in Real Trading:
โ Wait for structure break
โ Look for volume confirmation
โ Place stops above/under the invalidation zone
โ Be patient โ retests give the best risk-reward
๐ธ 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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