Reversal bars are an objective technique used to time the entry and exit of a trade. When pattern, price and time all come together at a suspected major pivot, and you hesitate while wondering if the prior trend will continue against your new position, a reversal bar can be the objective trigger to prompt you to take action. The examples have many variations. The example given is not the only possible configuration for that reversal bar type. The important concept is that with every configuration, prices make a new high (or low) but close opposite the direction of the open and the trend. The reversal bar is telling you that the trend for that time frame has run out of gas and that no new buyers or sellers are coming into the market. For bullish reversals substitute low for high.

Enter a bull trade on a bullish reversal bar and exit a bull trade on a bearish reversal bar. Not every reversal bar is significant. This is especially true for intraday charts. Reversal bars take on importance when they occur at a coincidence of pattern, price and time determined by methods like the Square of Nine, Hurst Displaced Average Intersections, or Fibonacci Projections.

Not every major pivot point is marked by a reversal bar. Continuation set-ups can still get you in a trade relatively close to the pivot point. Continuation bars are easily identified on a bar or candlestick chart. They always start with either an inside bar or an outside bar.

WD GANN | FIBONACCI | HURST CYCLES | ELLIOTT WAVE | ARTICLES | FREE GIFT