Many traders use graphical analysis to assess the market situation. And it really shows high efficiency. But to form a graphic figure, as a rule, it takes a considerable amount of time. However, sometimes one or two candles are enough to get a high-quality signal to enter the market. Key Reversal or “key reversal” refers specifically to these patterns. In fact, it consists of one candle.
Bullish model Key Reversal
It is formed on a downward motion. Key Reversal up is a bull candle, the minimum of which is below the minimum of the previous candle. At the same time, it closes above the closing price of the previous candle. On the chart, this may look like this:
As you can see, there was a strong downward movement in the market. However, the attempt to continue the price was unsuccessful. She formed another minimum, but then turned around, and the candle closed above the price of closing the previous candle.
Bear Model Key Reversal
In this case, there is an upward movement in the market, in which a model appears that indicates a likely reversal. It is a candle, the maximum of which is higher than the maximum of the previous candle. At the same time, the closure occurs below the closing price of the previous candle.
Recommendations for the application of the pattern
The effectiveness of the application in trade of this pattern will increase if used taking into account fundamental factors and volumes. Besides, turn signal can be considered strong if it has formed near an important level. Entering the market when such a pattern appears occurs at the opening of the next candle. However, some traders prefer to reduce risks. To do this, they interpret the model somewhat differently. The signal for the purchase is a candle, which not only updated the minimum, but also closed above the maximum of the previous day. Accordingly, the signal for sale is considered the closing of the candle below the minimum of the previous candle. There is another option. Some traders preferably, the closing of the signal plug occurs above/below the local extremum. That is, they focus on the minimum/maximum formed by the last few candles. After the opening of the warrant, it is necessary to monitor further developments in the market. If during the period of formation of 2-3 candles the deal remained in the negative zone, then it is better to close it. In any case, the Key Reversal requires some experience in applying it to trade. You can get it on a demo account. Inga Fedorova 25.09.2021 Record Candle pattern Key Reversal first appeared forex-for-you.ru.