Detecting 1-2-3 Reversal Patterns with Swing Pivots

Summary

This indicator identifies a three-swing formation that may signal a change in trend. It tracks successive local highs and lows, using a lookback window to confirm pivot points. In a bearish setup, a high is followed by a low and a lower high; the pattern is marked when price crosses below the intervening low. In a bullish setup, a low is followed by a high and a higher low; the marking occurs when price crosses above the intervening high. The indicator can display pivot labels, numbered pattern points, connecting lines, and a projected break level.

Average true range is used to position chart annotations relative to price. The document provides indicator logic, but no systematic evaluation, sample of trades, or evidence that the pattern predicts profitable moves. Pivot confirmation depends on surrounding bars, so signals may appear only after some delay; the described markings should be treated as chart analysis rather than proof of a reliable trading edge.

Key ideas

• The indicator tracks alternating swing highs and lows to form three-point patterns.
• A bearish setup marks a break below the middle swing low after a lower high forms.
• A bullish setup marks a break above the middle swing high after a higher low forms.
• Average true range offsets labels and arrows on the chart.
• The document provides no backtest or evidence of predictive profitability.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.