Trading stocks education - Trading tactics & examples

REVERSAL BARS

Reversal bars are an objective technique used to time the entry 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 demonstrated below 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 just substitute low for high.

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.

Reversal Bar - Makes higher High and closes below Today's Open and Yesterday's Close Key Reversal Bar - Opens below prior bar close, makes new High. Closes below prior Close and Today's Open. Outside Key Reversal Bar - Opens below prior bar close, makes new High. Closes below prior Close and Today's Open. Signal Bar - Opens above prior Close, makes new High. Closes below Today's Open. With VisualTrader, you will know when the market is turning, which industry groups are leading the stampede, and which charts have the best setups. OmniTrader gives you the power to make decisions fast! It gives you real trading signals with all of the supporting information automatically displayed for you. Gap Signal Bar - Opens above prior Close, makes new High. Closes below Today's Open but Gap is not filled. Snap Back Reversal Bar - Day 1 makes new High, opens bottom 1/3 of the bar, closes top 1/3. Day 2 opens top 1/3 of the bar, closes bottom 1/3, does not have to make new High. Reversal Confirmation - First day that Close is below Open. Better signal if it makes lower Low. …Trading Signals                       Continuation Bars…