A price action reversal pattern is a technical analysis tool used by traders to identify potential market reversals. This pattern typically appears after a prolonged trend, indicating that the market may be ready for a reversal in the opposite direction. Price action reversal patterns can be identified on a price chart by looking for certain characteristics, such as a series of higher highs and higher lows for a bullish trend or lower highs and lower lows for a bearish trend. Some popular price action reversal patterns include double tops and bottoms, head and shoulders, and bullish and bearish engulfing patterns. Traders can also use candlestick patterns, such as doji, hammer, and shooting star, to identify potential reversals. By identifying price action reversal patterns, traders can make informed decisions on whether to enter or exit a trade, potentially increasing their profitability.

A price action reversal pattern is a formation on a price chart that signals a potential change in the direction of the prevailing trend. Traders use these patterns to identify possible turning points in the market, allowing them to anticipate shifts from bullish to bearish trends or vice versa. Common reversal patterns include the head and shoulders, double tops and bottoms, and the hammer and shooting star candlestick patterns.

To identify a reversal pattern on a price chart, traders look for key characteristics such as specific shapes, candlestick formations, and volume changes. For instance, a head and shoulders pattern comprises three peaks, with the middle peak being the highest, indicating a potential bearish reversal. Additionally, confirmation of the pattern often requires a breakout from a support or resistance level accompanied by increased trading volume. Recognizing these patterns can help traders make informed decisions about entering or exiting trades.