Trend Reversal Patterns
Trend Reversal Patterns represent geometric models on the charts of currency rates which are formed after the price level has reached its maximum value in the current trend. These patterns serve to indicate that the ongoing trend is about to change the course and their recognition helps to identify the end of the trend and the beginning of a new movement. A notable feature of the recognition of these models is that the trader is informed not only about the imminent change in the trend, but also the possible value of price movement.
The Head and shoulders graphical price pattern signals the end of trend and the following change in direction of the asset’s price. It is typically formed in a developed uptrend.
The inverse head and shoulders graphical price pattern serves as a sign of trend reversal and is expected to be followed by change in direction of the asset’s price. It is typically formed in a developed downtrend.
The double top pattern is considered a graphical price formation which precedes existing trend reversal. It is typically formed in an uptrend and is expected to be followed by a drop in prices, while the longer it takes for the pattern to be formed the more reliable it is.
The double bottom price pattern is believed to be a sign of existing downtrend reversal. Prices are expected to begin a rally following its formation, while the longer it takes for the pattern to be formed the more reliable it is.
The brilliant graphical price pattern serves for existing trend reversal confirmation in case of its occurrence on the chart. Traditionally it appears in an uptrend.