How to Read Reversal Patterns for New Traders

The common reversal chart patterns used to trade that beginner trades should know are described below.

Reversal Patterns

The commonly used reversal patterns are:

Double Tops Reversal Chart Pattern

Double tops pattern is an M shaped two tops or 2 peaks pattern that forms on the price chart during a upward trend.

Double tops pattern is a bearish pattern that forms when price reaches a resistance zone.

The price will move upwards and then dip slightly then turn up & move up to the top level where it had reached or slightly below this level then move downwards again forming what is referred to as a double top pattern.

Double Bottoms Reversal Chart Pattern

Double bottoms pattern is a W shaped two bottoms or two lows pattern that forms on the price chart during a downwards trend.

Double bottoms chart pattern is a bullish pattern that forms when price reaches a support zone.

The price will move downward in then move upwards slightly then turn downward & move downwards to the bottom level where it had reached or slightly above this level then move upward again forming what is known as a double bottom pattern.

Head & Shoulders Reversal Pattern

Head & Shoulders pattern is a bearish reversal chart pattern that forms after a upward trend.

There is an initial peak which is the first shoulder then a slight dip in the price, then a second higher peak that's the head then another price dip followed by last peak in price which is the second shoulder.

The lowest points between the two price lows forms the neckline and the reversal signal from this head and shoulders reversal chart pattern is confirmed once price moves below this neckline.

Reverse Head and Shoulders Reversal Pattern

Reverse Head and Shoulders chart pattern is a bullish reversal pattern that forms after a downward trend.

There is an initial dip which is the first inverse shoulder then a slight peak in price, then a second lower dip which is the reverse head & then another price peak followed by last price dip in price which is the second inverse shoulder.

The highest points between the two price peaks forms the neck-line and the reversal signal from this reverse head and shoulders pattern is confirmed once price moves above this neckline.

How Do You Read Reversal Chart Patterns for New Traders