Two Bar reversals explained!

Beginner Questions
1

Hi Traders!

I have made a recent discovery, though I’m probably not the first one to identify this, but I couldn’t find anything online that described 2 Bar Reversals. I feel that after I came up with these explanations, I feel as though I understand them a lot better and I felt that others should come to understand them as well. I have attached some pictures, hopefully they show on the thread so that you can read them.

So with out further ado…

A 2 Bar Reversal is… A PIN BAR!

Seriously. The formation of a 2 Bar Reversal and the psychology behind it is the exact same as Pin Bar! Here’s my reasoning/proof.



Below is an example of the application of a 2 bar reversal, aside from trading it as a pinbar.

Since two bar reversals are pinbars, we’ve identified another way to make profits since most of us “price action traders” are familiar with the pinbar. Here’s another way two bar reversals can help us. The top red line represents recent resistance on this weekly chart of the GBP/USD. We can say that since the end of March 2012, this resistance has held. (note that the other shadows/wicks/tails were only false breaks of the resistance) However, notice where Arrow A is pointing to. If we look at these two candles, you can mentally envision them as a bullish pinbar, this one particularly being called a “shooting star”. If you view this as a pinbar, where the shadow is now a false break, then our resistance line has not been broken since Arrow B, since the middle of September 2011. This understanding has increased the strength of the resistance line. Now should a price action signal appear as price appreciates by theis resistance line, we can identify a much greater strength and confirmation of a move that may occur, thanks to the added, previously unrealized idea, fact that the resistance line has actually been holding for just over 2 years.

2 bar reversal application.jpg700×411 23.1 KB

Please don’t take this as 100% correct. If you can prove that this is wrong, tell me immediately so that I may get rid of it as to the fact that I don’t want to confuse newbies. If you can back this and agree with it, please indicate so and your reasoning. So, Compliments/Punishments?

Trade on Traders.

2

Hi,

You discovered a powerful price action signal, good on you.

Cheers

3

Thanks Kasravi. Am I correct in stating that 2 Bar Reversals are essentially pin bars?

4

Yes you are absolutely right.

Cheers

5

has anyone found this to be a useful explaination or has it turned on any lightbulbs?

6

Hi awk3524,

that is clear explanation :slight_smile: If you don’t mind I will distribute it to few other traders who has trouble seeing it that way.

I think you meant arrow A is bearish (not bullish ) indication on the resistance line (typo)

cheers
hannele

7

Am I missing something here? I’m pretty sure these two bar reversal patterns are common candlestick patterns which have already been well documented. I mean I’m not a candlestick expert but in your first diagram with the 1 and 2, isn’t that just a bearish engulfing pattern?

Also in your last diagram where you have arrow A, isn’t that a dark cloud cover pattern?

8

sure, combine enough candles and you will end up with a pin bar of sorts. What really matters is the price levels that you see these types of price action.

9

I agree. What matters most is how you can use it and if you interpret it right. Just because you see a pinbar does not mean price will move in a certain direction.