10 Price Pr ice Action Action Bar Patterns Patter ns Yo You Must Mu st Know Kno w By Galen Wo Woods ods in in Trading Articles on 9 April 2014 Read more about Bar Patterns, Patterns, Price Action Bar patterns are nity s!ort"term patterns t!at are useul or timing trades and inding logical stop"loss points# $o price action trader can do %it!out learning about about bar patterns# And t!ese are 10 bar patterns t!at you must &no%# Reversal Bar Patterns
1# Re'ersal Bar 2# (ey Re'ersal Bar )# *+!austion Bar 4# Pinocc!io Bar # T% T%o"Bar o"Bar Re'ersal -# T!ree"Bar Re'ersal .# T!ree Bar Pullbac& Volatility Bar Patterns
/# nside Bar 9# utside Bar 10# $R. 10# $R. Learn more: Price Action Trading Resource Guide
1. Reversal Bar Pattern
What oes it loo! li!e"
A bullis! re'ersal bar pattern goes belo% t!e lo% o t!e pre'ious bar beore closing !ig!er# A bearis! re'ersal bar pattern goes abo'e t!e !ig! o t!e pre'ious bar beore closing lo%er# What oes it mean"
or t!e bullis! pattern, t!e mar&et ound support belo% t!e lo% o t!e pre'ious bar# $ot only t!at, t!e support %as strong enoug! to pus! t!e bar to close !ig!er t!an t!e pre'ious bar# T!is is t!e irst sign o a possible bullis! re'ersal# or t!e bearis! pattern, t!e mar&et met resistance abo'e t!e !ig! o t!e pre'ious bar# urt!ermore, t!e resistance %as strong enoug! to cause t!e current bar to close lo%er# #ow o we trae it"
1# Buy abo'e t!e bullis! re'ersal bar in a uptrend 2# 3ell belo% t!e bearis! re'ersal bar in a do%ntrend
$.
Key Reversal Bar
What oes it loo! li!e"
A &ey re'ersal bar is a speciic instance o a re'ersal bar t!at s!o%s clearer signs o a re'ersal# A bullis! &ey re'ersal bar opens belo% t!e lo% o t!e pre'ious bar and closes abo'e its !ig!# A bearis! &ey re'ersal bar opens abo'e t!e !ig! o t!e pre'ious bar and closes belo% its lo%# By deinition, &ey re'ersal bars open %it! a price gap# As price gaps %it!in intraday time"rames are rare, most &ey re'ersal bars are ound in t!e daily and abo'e time"rames# What oes it mean"
A do%n gap is a po%erul do%n t!rust# W!en t!e mar&ets reects suc! a strong bearis! mo'e %it! certainty, it mig!t !a'e re'ersed its sentiment to bullis!# n t!e ot!er !and, %!en a gap up%ards bumps into clear resistance, t!e mar&et mig!t !a'e turned bearis!# *ssentially, a &ey re'ersal bar is a 'iolent display o strengt! t!at !ints at a c!ange o mar&et sentiment# #ow o we trae it"
1# Buy abo'e a bullis! &ey re'ersal bar 5 uncertain, %ait or price to close abo'e it beore buying#6 2# 3ell belo% a bearis! &ey re'ersal bar 5 uncertain, %ait or price to close belo% it beore selling#6
%. &'haustion Bar
What oes it loo! li!e"
A bullis! e+!austion bar opens %it! a gap do%n# T!en, it %or&s its %ay up to close near its top# A bearis! e+!austion bar opens %it! a gap up beore mo'ing do%n to close as a bearis! bar# n bot! cases, t!e gap remains unilled# n addition, !ig! 'olume s!ould occur %it! t!e e+!austion bar# What oes it mean"
ts name e+plains it all# t represents e+!austion and a ailed last"ditc! attempt# Ater t!e bears are e+!austed, t!e bulls %ill ta&eo'er and t!e mar&et %ill rise# Ater t!e bulls are e+!austed, t!e bears %ill ta&e t!e mar&et do%n# #ow o we trae it"
1# Buy abo'e a bullis! e+!austion bar
2# 3ell belo% a bearis! e+!austion bar
Rea: *+!austion Gap Trading
(. Pinocchio Bar )Pin Bar*
What oes it loo! li!e"
t loo&s li&e t!e nose o Pinocc!io# t !as a long and ob'ious tail# or bullis! pin bars, t!e lo%er tail ta&e up most o t!e bar# or bearis! pin bars, it is t!e upper tail t!at dominates# What oes it mean"
Parap!rasing 7artin Pring, t!e pin bar lies li&e Pinocc!io#
Wit! its long tail, a pin bar brea&s a support or resistance momentarily to tric& traders into entering t!e %rong direction# T!ese traders are trapped, and t!ere is al%ays money to be made %!en you ind trapped traders# #ow o we trae it"
1# Buy abo'e a bullis! pin bar t!at is reected rom support le'el 2# 3ell belo% a bearis! pin bar t!at is reected rom a resistance le'el
ind more pin bar e+amples !ere#
+. ,wo-Bar Reversal
What oes it loo! li!e"
T!e t%o"bar re'ersal pattern is made up o t%o strong bars closing in opposite direction# T!e bullis! 'ariant consists o a strong bearis! bar ollo%ed by a bullis! bar# Re'erse t!e order to get its bearis! counterpart#
What oes it mean"
*'ery re'ersal pattern %or&s on t!e same premise# A clear reection o a do%n t!rust is a bullis! re'ersal, and a clear reection o an up t!rust is a bearis! re'ersal# n t!is case, t!e irst bar represents t!e irst t!rust, and t!e second bar represents its reection# #ow o we trae it"
1# or bullis! re'ersals, buy abo'e t!e !ig!est point o t!e t%o"bar pattern# 2# or bearis! re'ersals, sell belo% t!e lo%est point o t!e t%o"bar pattern#
. ,hree-Bar Reversal
What oes it loo! li!e"
n se8uence, t!e t!ree bars o t!e bullis! pattern are
1# A bearis! bar 2# A bar !as a lo%er !ig! and lo%er lo% )# A bullis! bar %it! a !ig!er lo% and closes abo'e t!e !ig! o t!e second bar Accordingly, t!e bearis! pattern is made up o 1# A bullis! bar 2# A bar !as a !ig!er !ig! and !ig!er lo% )# A bearis! bar %it! a lo%er !ig! and closes belo% t!e lo% o t!e second bar What oes it mean"
A t!ree"bar re'ersal pattern s!o%s a turning point# :ompared to t!e ot!er re'ersal patterns, t!e t!ree"bar re'ersal pattern is t!e most conser'ati'e one as it e+tends o'er t!ree bars, using t!e t!ird bar to conirm t!at t!e mar&et !as c!anged its direction# #ow o we trae it"
1# Buy abo'e t!e last bar o t!e bullis! pattern 2# 3ell belo% t!e last bar o t!e bearis! pattern
Rea: Adapting t!e T!ree"Bar Re'ersal or ;ay Trading
/. ,hree-Bar Pullac!
What oes it loo! li!e"
T!is bar pattern is easy to identiy# T!ree consecuti'e bearis! bars orm a bullis! pullbac& pattern, and t!ree consecuti'e bullis! bars orm a bearis! pullbac& pattern# What oes it mean"
W!en t!e mar&et is trending, it is diicult to sustain a counter"trend pullbac&#
1# Wit!in a bull trend, %ait or t!ree consecuti'e bearis! bars# T!en, buy abo'e t!e ne+t bullis! bar# 2# Wit!in a bear trend, %ait or t!ree consecuti'e bullis! bars# T!en, sell belo% t!e ne+t bearis! bar#
Rea: mpro'ing t!e T!ree"Bar Pullbac&
. 2nsie Bar
What oes it loo! li!e"
An inside bar must stay completely %it!in t!e range o t!e bar immediately beore it# n ot!er %ords, t!e second bar must !a'e a lo%er !ig! and a !ig!er lo%# What oes it mean"
An inside bar is a momentary contraction in price range='olatility# Wit!in t!e same unit time, t!e mar&et co'ers less ground and stays completely %it!in t!e range o t!e pre'ious bar# t is a pause in price action and does not s!o% clear strengt! in eit!er direction# #ow o we trae it"
1# Place brac&et orders around it to trade its brea&"out in eit!er direction# 5A buy stop order abo'e its !ig!, and a sell stop order belo% its lo%# nce one order is triggered, cancel t!e ot!er#6 2# Place only one order 5buy or sell6 according to t!e mar&et trend# )# Wait or a brea&"out o t!e inside bar and trade its ailure#
Rea: A T%ist on t!e nside Bar
3. 4utsie Bar
What oes it loo! li!e"
An outside bar pattern is t!e polar opposite o an inside bar# ts range must e+ceed t!at o t!e pre'ious bar %it! a !ig!er !ig! and a lo%er lo%# What oes it mean"
t is a s!ort"term e+pansion in price range='olatility# t s!o%s strengt! in bot! directions# n most cases, it is uncertain i t!e bulls or t!e bears !a'e %on# T!e only certainty is increased 'olatility# #ow o we trae it"
1# Wait or a brea&"out o t!e outside bar and ade it# 5*specially or outside bars t!at loo& li&e dois, or t!ose t!at go against t!e trend#6 2# Trade its brea&"out, especially %!en t!e outside bar closes near its top or bottom# 5e#g# Popgun Pattern6
10. 5R/
What oes it loo! li!e"
T!is bar pattern re8uires se'en bars# t!e last bar !as t!e smallest bar range %it!in t!e se8uence, it is a $R. pattern# To clariy, bar range reers to t!e dierence bet%een t!e !ig! and t!e lo% o a bar#
What oes it mean"
>i&e t!e inside bar, it indicates decreasing 'olatility# As t!e lo%er 'olatility comes %it!in t!e conte+t o se'en bars, instead o a single bar li&e in t!e case o an inside bar, t!e $R. pattern is a stronger sign o decreasing 'olatility#
1# Buy brea&"out o t!e !ig! o t!e last bar i t!e trend is up 2# 3ell brea&"out o t!e lo% o t!e last bar i t!e trend is do%n
Rea: $R. Trading 3trategy
What6s 5e't" #yri Patterns T!ese ten patterns are not mutually e+clusi'e# n act, t!ere are many combinations t!at produces eecti'e bar patterns#
;=$R4 combines an inside bar %it! a 'ariant o $R.
•
Re'ersal bar ater a t!ree"bar pullbac&
•
T%o"bar re'ersal %it! an inside bar as t!e second bar
Beyon Bar Patterns Bar 7atterns alone will not o88er a train9 e9e.
:ommon strategies incorporate mar&et bias analysis, 'olume analysis, and trading indicators into t!e mi+# Bar patterns orm ust one acet o a price"based trading approac!#
