Reversal Patterns today, we are going to talk about such patterns inside the stock market, which are very well formed, and after that, the market is reversed. These patterns usually start at the bottom and top of the market.
To recognize these patterns, you need to have some technical analysis knowledge. Suppose you do not have even a little understanding of the stock market. Then this pattern is of no use to you because you will not be able to recognize them.
Then how will you trade on them? Whenever reversal patterns are performed inside the market, it shows its weakness. How crowded is the market here, and on which side will the direction of the market be?
Head And Shoulder
This pattern is unique and valuable. Whenever such a reversal pattern is formed inside the market. From there, the market changes its direction, but this pattern is not a candlestick pattern but a chart pattern.
As the market increases, chart patterns are always performed in conjunction with candlestick reversal patterns. Then comes down. Then it goes up a bit, then comes down, then goes up, then comes down. So whatever is in the movement gets happening.
Based on that, these chart patterns and reversal patterns are formed. In the head-shoulder design, the market first sets a high and then a second high slightly higher. Then the previous high is immediately followed by another somewhat lower high than the previous one.
In this way, a pattern that looks like a head and shoulders is forming in the market. Which we call head and shoulders.? Now it comes; how do we take entry on this? Friends, to take an exit. We have to wait for the break of its neckline as soon as there is a break of the neckline.
Then we have to enter below it, and our stop loss will be on the left shoulder of the head and shoulder. We have kept the risk-reward ratio at 1:2. Either we will hit our stop loss or our target. Before this, we do not have to close the trade.
Inverted Head And Shoulder In Reversal Patterns
Friends, this reversal pattern is opposite to the head and shoulders. Head and shoulders move the market from top to bottom, but inverted head and shoulders move the market from bottom to top. It works to eliminate the market’s current and also changes the structure of the market.
We have to trade as soon as we get a small confirmation because the accuracy of this reversal pattern is very high; a reversal pattern is essential in this market. How is this pattern will be made? The market will go down here first and come up by making a low.
Again, the market will go down and make a new low; its low will be higher than the previous low. Once again, the market will go down and create a new low, but this one will be slightly lower than the previous one. In this way, the head and shoulders will become
Now it comes to how to trade it, Friends; we have to wait as soon as there is a break of the neckline of this inverted head and shoulder, then we have to enter the buy-side. And we have to keep our risk-reward ratio one to two.
Reversal Chart Pattern Double Bottom
Friends, this is also a market’s golden reversal pattern performed by candlesticks. As soon as a double top forms, the market changes its trend. First, there was an uptrend inside the market, and after that, the downtrend started coming into the market.
A unique thing about the pattern is that it is made at the top of the market, and the call comes twice after testing its high. How is this pattern made?
Friends, first, the market makes it is a new high; immediately after that, it makes a swing low, and as soon as it goes up a bit after hitting a low, it starts falling after testing the previous high. As soon as it Cuts the previous low you had made, the downfall begins coming very severely in the market.
It comes to how we place our stop loss and target on this. So while entering the market, we must know its address at our store before entering. Friends, as soon as we have entered the middle of the double top, we have to take the exit of the sell-side immediately.
And we have to put our stop loss a little bit above the double top. And keep your risk-reward ratio as a ratio of two.
Double Bottom In Reversal Patterns
This is precisely the opposite of the double top. A double bottom is included just as a double top is formed in the market. The function of the double top is to bring the market trend from top to bottom. Again, its job is to carry directions from the bottom to the top.
It is made at the very bottom of the market; it changes the direction of the market’s trend. Friends, the market first makes its 1st and then makes a small swing high. After that, the call comes down and sets up a swing low. And after that low, the market starts moving up.
As soon as the market crosses that high, which had put a small high behind it, then from there, the market becomes downright Bullish. And change its trend. After this, the market starts moving upward.
It comes to how we have to take entry into this reversal pattern. Friends, we must wait for the middle-high break inside this. As it is an eye brake, we must enter the buy side entry. And we have to place our stop loss at the bottom.
We do not have to be in any hurry while trading in the market. Just have to do that is wait. You know any train in the market for no reason until your set-up is your own.