Reversal Bars Are Essential Forex Trading Knowledge
Reversal bars are not a stand-alone technical analysis technique but their consequence can be so significant that the application of almost every other technical analysis technique benefits from recognizing them as they occur and from understanding their implications.
The important concept with every reversal bar configuration is that prices make a new high (or low) but close opposite the direction of the open and opposite the direction of the trend. The reversal bar is telling you that no new buyers or sellers are coming into the market and, that the trend for that time frame may have run out of gas.
As a practical matter reversal bars should not be used as a stand-alone trading system, particulary when the stock, commodity or forex dataset is less than weekly.
As a complement to a familiar trading technique, however, reversal bars can be the performance edge that you have been looking for.
We’ll cover the other reversal bar formations in future posts.
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