Friday, November 16, 2012

2 Bar Reversal


The 2 bar Reversal identifies a possible trend reversal.
The first two bars must trade in the same direction and be trending bars. The third bar reverses the trend direction by taking out the low of the second bar (for short) or the high of the second bar (for long).



The Bearish 2 Bar Reversal
1. Bar 1 has a higher high, higher low and a higher close.
2. Bar 2 has a higher high, higher low and a higher close than bar 1.
3. Bar 3 reverses the trend by trading below the low of bar 2.





The Bullish 2 Bar Reversal
1. Bar 1 has a lower high, lower low and a lower close.
2. Bar 2 has a lower high, lower low and a lower close than bar 1.
3. Bar 3 reverses the trend by trading above the high of bar 2.


How To Trade the 2 Bar reversal
Bullish 2 Bar Reversal:

  •  Buy 1 pip above the high of bar 2
  •  Place your stop loss at the low of the breakout bar 3.


Bearish 2 Bar Reversal:

  •  Sell 1 pip below the low of bar 2
  •  Place the stop loss at the high of bar 3.


Below is a EURUSD Daily chart. It is obvious this system has the possibility to get you into swing trades at the best possible level.





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