Three-Bar Key Reversal Pattern and Trend Filter

Summary

The document describes a three-bar price-action pattern intended to identify possible reversals. A bullish setup consists of two declining bars followed by an advancing bar whose close exceeds the preceding bar’s high. A bearish setup mirrors this: two advancing bars followed by a declining bar whose close falls below the preceding bar’s low. In both cases, the final bar must extend beyond the range of the second bar in the direction of the reversal.

An optional trend filter examines bars before the pattern’s key bar, with a configurable lookback period; disabling it leaves the signal based on the key bar alone. The listed settings also control alerts and notifications. The document explains the pattern definition and indicator options but gives no performance tests, entry or exit rules, or evidence that the signals predict profitable reversals. It is a pattern description, not a complete trading strategy.

Key ideas

• A bullish key reversal requires two bearish bars followed by a bullish close above the second bar’s high.
• A bearish key reversal requires two bullish bars followed by a bearish close below the second bar’s low.
• A configurable trend filter can consider bars preceding the key bar.
• The indicator includes alert and notification options, but no profitability evidence is provided.

Tags

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