Bar patterns are elegant tools for every trader who trades on Price Action signals. I present to you 10 bar patterns that you must know!
These patterns are easily found on charts and allow for easy placement of stop loss and take profit.
Reversal Bar Patterns
1. Reversal Bar
2. Key Reversal Bar
3. Exhaustion Bar
4. Pin Bar
5. Two-Bar Reversal
6. Three-Bar Reversal
7. Three Bar Pullback
Volatility Bar Patterns
8. Inside Bar
9. Outside Bar
10. NR7
1. Reversal Bar
The low of a bullish reversal bar is below the low of the previous bar, and the close is above the close of the previous bar.
The high of a bearish reversal bar is above the high of the previous bar, and the close is below the close of the previous bar.
Buy above a bullish reversal bar in an uptrend.
Sell below a bearish reversal bar in a downtrend.
2. Key Reversal Bar
A bullish key reversal bar opens below the low of the previous bar and closes above its high.
A bearish key reversal bar opens above the high of the previous bar and closes below its low.
By definition, key reversal bars open with a price gap. Since gaps on intra-day timeframes are rare, most key reversal bars are found on daily timeframes and higher.
Buy above a bullish key reversal bar (if you are not sure, wait until the price closes above it, and only then buy).
Sell below a bearish key reversal bar (if you are not sure, wait until the price closes below it, and only then sell).
3. Exhaustion Bar
A bullish exhaustion bar opens with a downward gap. The price then moves up, and the bar closes near its high.
A bearish exhaustion bar opens with an upward gap. The price then moves down, and the bar closes near its low.
In both cases, the gap remains unfilled. Additionally, the exhaustion bar should form on high volume.
Buy above a bullish exhaustion bar.
Sell below a bearish exhaustion bar.
4. Pin Bar
It has a long and distinct tail.
In bullish pin bars, the lower tail occupies most of the bar. In bearish pin bars, the upper tail dominates.
Buy above a bullish pin bar that bounces off a support level.
Sell below a bearish pin bar that bounces off a resistance level.
5. Two-Bar Reversal
The two-bar reversal pattern consists of two strong bars closing in opposite directions.
The bullish version consists of a strong bearish bar followed by a strong bullish bar. The bearish version consists of a strong bullish bar followed by a strong bearish bar.
In bullish reversals, buy above the highest point of the two-bar pattern.
In bearish reversals, sell below the lowest point of the two-bar pattern.
6. Three-Bar Reversal
The bullish pattern consists of the following three bars:
1. A bearish bar
2. A bar with a lower high and a lower low
3. A bullish bar with a higher low and a close above the high of the second bar
The bearish pattern consists of the following three bars:
1. A bullish bar
2. A bar with a higher high and a lower low
3. A bearish bar with a lower high and a close below the low of the second bar
Buy above the high of the last bar in a bullish pattern.
Sell below the low of the last bar in a bearish pattern.
7. Three Bar Pullback
Three consecutive bearish bars form a bullish three-bar pullback pattern, and three consecutive bullish bars form a bearish three-bar pullback pattern.
In a bullish trend, wait for three consecutive bearish bars to form. Then buy above the next bullish bar.
In a bearish trend, wait for three consecutive bullish bars to form. Then sell below the next bearish bar.
8. Inside Bar
The inside bar must be completely within the range of the previous bar. In other words, the second bar must have a lower high and a higher low.
Place bracket orders around this pattern to trade its breakout in either direction. (A buy order above its high and a sell order below its low. Once one order is filled, cancel the other.)
Place only one order (either a buy or a sell) in accordance with the market trend.
Wait for the breakout of the inside bar and trade its lack of follow-through.
9. Outside Bar
The outside bar is the complete opposite of the inside bar.
Its range must exceed the range of the previous bar, i.e. it has a higher high and a lower low.
Wait for the breakout of the outside bar and open a position against the market movement. (Especially if the outside bars look like dojis or go against the trend.)
Trade its breakout, especially when the outside bar closes near its top or bottom.
10. NR7
This pattern requires the presence of seven bars. If the last bar has the smallest range in the sequence of bars, then this is an NR7 pattern.
As a reminder, the range of a bar is the difference between its high and low.
Buy on the breakout of the high of the last bar, if the trend is upward.
Sell on the breakout of the low of the last bar, if the trend is downward.
These patterns are easily found on charts and allow for easy placement of stop loss and take profit.
Reversal Bar Patterns
1. Reversal Bar
2. Key Reversal Bar
3. Exhaustion Bar
4. Pin Bar
5. Two-Bar Reversal
6. Three-Bar Reversal
7. Three Bar Pullback
Volatility Bar Patterns
8. Inside Bar
9. Outside Bar
10. NR7
1. Reversal Bar
The low of a bullish reversal bar is below the low of the previous bar, and the close is above the close of the previous bar.
The high of a bearish reversal bar is above the high of the previous bar, and the close is below the close of the previous bar.
Buy above a bullish reversal bar in an uptrend.
Sell below a bearish reversal bar in a downtrend.
2. Key Reversal Bar
A bullish key reversal bar opens below the low of the previous bar and closes above its high.
A bearish key reversal bar opens above the high of the previous bar and closes below its low.
By definition, key reversal bars open with a price gap. Since gaps on intra-day timeframes are rare, most key reversal bars are found on daily timeframes and higher.
Buy above a bullish key reversal bar (if you are not sure, wait until the price closes above it, and only then buy).
Sell below a bearish key reversal bar (if you are not sure, wait until the price closes below it, and only then sell).
3. Exhaustion Bar
A bullish exhaustion bar opens with a downward gap. The price then moves up, and the bar closes near its high.
A bearish exhaustion bar opens with an upward gap. The price then moves down, and the bar closes near its low.
In both cases, the gap remains unfilled. Additionally, the exhaustion bar should form on high volume.
Buy above a bullish exhaustion bar.
Sell below a bearish exhaustion bar.
4. Pin Bar
It has a long and distinct tail.
In bullish pin bars, the lower tail occupies most of the bar. In bearish pin bars, the upper tail dominates.
Buy above a bullish pin bar that bounces off a support level.
Sell below a bearish pin bar that bounces off a resistance level.
5. Two-Bar Reversal
The two-bar reversal pattern consists of two strong bars closing in opposite directions.
The bullish version consists of a strong bearish bar followed by a strong bullish bar. The bearish version consists of a strong bullish bar followed by a strong bearish bar.
In bullish reversals, buy above the highest point of the two-bar pattern.
In bearish reversals, sell below the lowest point of the two-bar pattern.
6. Three-Bar Reversal
The bullish pattern consists of the following three bars:
1. A bearish bar
2. A bar with a lower high and a lower low
3. A bullish bar with a higher low and a close above the high of the second bar
The bearish pattern consists of the following three bars:
1. A bullish bar
2. A bar with a higher high and a lower low
3. A bearish bar with a lower high and a close below the low of the second bar
Buy above the high of the last bar in a bullish pattern.
Sell below the low of the last bar in a bearish pattern.
7. Three Bar Pullback
Three consecutive bearish bars form a bullish three-bar pullback pattern, and three consecutive bullish bars form a bearish three-bar pullback pattern.
In a bullish trend, wait for three consecutive bearish bars to form. Then buy above the next bullish bar.
In a bearish trend, wait for three consecutive bullish bars to form. Then sell below the next bearish bar.
8. Inside Bar
The inside bar must be completely within the range of the previous bar. In other words, the second bar must have a lower high and a higher low.
Place bracket orders around this pattern to trade its breakout in either direction. (A buy order above its high and a sell order below its low. Once one order is filled, cancel the other.)
Place only one order (either a buy or a sell) in accordance with the market trend.
Wait for the breakout of the inside bar and trade its lack of follow-through.
9. Outside Bar
The outside bar is the complete opposite of the inside bar.
Its range must exceed the range of the previous bar, i.e. it has a higher high and a lower low.
Wait for the breakout of the outside bar and open a position against the market movement. (Especially if the outside bars look like dojis or go against the trend.)
Trade its breakout, especially when the outside bar closes near its top or bottom.
10. NR7
This pattern requires the presence of seven bars. If the last bar has the smallest range in the sequence of bars, then this is an NR7 pattern.
As a reminder, the range of a bar is the difference between its high and low.
Buy on the breakout of the high of the last bar, if the trend is upward.
Sell on the breakout of the low of the last bar, if the trend is downward.