Overview of 3 Bar Reversal Indicator

There are many technical indicators available for intraday trading. The 3 bar reversal pattern is one of the most popular indicators for intraday trading. It is easy to spot on a candlestick charts and understand. This indicator is best used for intraday trade but can be modified to some extent for shorter-term or ultra-short-term trades. Let's now get into the three-bar reversal pattern.

Three bar reversal patterns - An overview

The trend reversal signal is identified by the 3 bar reversal chart. This pattern consists of three consecutive candlesticks whose movements indicate whether there is a trend reversal. This pattern is frequently used by traders who want to execute trades against the trend.

How do you use the three-bar reversal pattern?

After spotting the 3 Bar Reversal Pattern, it is always a good idea when to enter a trade. Technical indicators are not confirmations, but only indicators of a possible price movement. Technical indicators might not always be accurate in predicting future price movements.

Before you enter into a trade that is based on the 3 Bar Reversal Pattern, here are some important points.

• First, watch out for bullish or bearish candles that are consecutively placed.
• After you have spotted the three-bar reversal pattern, it is best to only enter into trades if the third candle moves in an opposite direction or surpasses the first candle. In the case of a bullish trend it would be wise to only enter a trade if the third candle is a bearish candle that surpasses the second.
• It is best to exit a trade as soon as possible after entering it.

Conclusion

The three-bar reversal pattern, which is a technical indicator, is used primarily by traders to formulate counter trend trading strategy. Counter trend trading strategies can be much more risky than just following the flow. It is best to confirm trend reversal prior to entering a trade. To avoid losing your trades, exit the position quickly.