How to Read Reversal Patterns for New Traders

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

Reversal Patterns

The commonly used reversal patterns are:

Double Tops Reversal Setup

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 and gets to a resistance zone.

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

Double Bottoms Reversal Setup

Double bottoms pattern setup is a W shaped 2 bottoms or 2 lows setup that forms on the price chart during a downwards trend.

Double bottoms chart pattern is a bullish pattern that forms when price reaches and gets to a support level.

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

Head and Shoulders Reversal Pattern

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

There is an initial peak which is the first shoulder then a modest dip in the price, then a second higher peak that's the head then another price dip which is followed by a 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 & shoulders reversal chart pattern is confirmed once price goes below this neckline.

Reverse Head & Shoulders Reversal Pattern

Reverse Head & Shoulders chart setup is a bullish reversal setup that forms after a downwards trend.

There's an initial dip which is the first inverse shoulder then a modest peak in price, then a second lower dip which is the reverse head and then another price peak followed by the 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 setup is confirmed once price goes above this neckline.

How Do You Read Reversal Setups for New Traders

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