The 2 Bar Reversal

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The 2 Bar Reversal is similar to the engulfing bar in that they are both reversal Price Action signals. The main difference between the 2 Bar Reversal and the Engulfing Bar is the 2 Bar Reversal does not have to fully engulf the previous candle or bar where as the Engulfing Bar does have to engulf at least one previous bar.

The psychology behind the 2 Bar Reversal is quite simple. For a bearish 2 Bar Reversal the first bar must go up and close near the sessions highs. This makes the rest of the market think that particular pair is breaking out higher, but this is a lie. When the second bar opens it whips back lower and fakes out the market, taking traders stops along the way. The second bar must then close near the session’s lows and preferably below the first bars open.

 

An Example of a Bearish 2 Bar Reversal:

2 Bar Reversals can be found in all markets and all time frames. This does not make all 2 Bar Reversals tradeable however. Not all 2 Bar reversals are created equal.

The very best 2 Bar Reversals can be found when a strong trend is in play and a pullback occurs to a logical pullback area. An example of this can be found below:

 

Bullish 2 Bar Reversal

 

Because 2 Bar Reversals are reversals signals it is critical traders look for them at swing points. When looking to trade short traders must look to trade from swing highs and when looking to go long they must look from swing lows. Failure to follow this rule and to trade 2 Bar Reversals as continuations signals would be a risky move.

Quite often you will notice 2 Bar Reversals will be the catalyst for a large change in the trend direction. An example of this can be found below. Notice the trend had been moving very strongly up before a very solid Bearish 2 Bar Reversal formed?

 

2 bar

 

bullish 2 bar reversal

 

Another Example of a Bearish 2 Bar Reversal From Swing High

Bearish 2 bar

 

Massive 2 Bar In-line With the Down Trend

 

2 bar reversal

 

The 2 Bar Reversal is a very easy Price Action formation for Price Action traders to identify on their charts. The next step is for a trader to learn where the best spots on the chart the 2 bar should be played from and then the art of managing the trade correctly once they have been entered.

More information on trade management can be found in the Price Action Course. Inside the members course you will learn advanced techniques not covered on the public site such as continuation and break out trading plus a ton more.

Before trading the 2 Bar Reversal on a live account traders are advised to first perfect their method on a demo account. There is no reason to lose money whilst learning in Forex. Traders should first prove to themselves that they can make money consistently for a period of a minimum of 3 months before attempting trading live.

You can read about how these setups should be played in live time in our markets trade setups & commentary, that we release each day after each New York close. You can find that here: Forex trade Setups & Market Commentary

 

The 2 Bar Reversal was last modified: September 29th, 2013 by Johnathon Fox
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About Johnathon Fox

Johnathon Fox is a professional Forex and Futures trader who also acts as a mentor and coach to thousands of aspiring traders from countries right around the world. Johnathon specialises in helping traders reach their full trading potential by helping them master the art of price action trading and correct money management techniques. To learn more about how you can become a student of Johnathon’s and learn the strategies he uses, then check out the Forex School Online Lifetime Membership

Comments

  1. Can u tell me Which time frame is better for 2 Bar Reversal?

  2. have any indicator for 2 bar reversl show.

  3. Ashley says:

    whoah this weblog is fantastic i really like studying your articles.
    Stay up the great work! You recognize, many people are looking around for this
    information, you can help them greatly.

  4. Thanks

  5. hi fox, what is difference between 2 bar reversal and engulfing ……???

  6. Manish Patel says:

    In char no. 4 ( Another Example of 2 bar reversal from swing high)

    2 bars Looks like a Bullish Pin bar, but price violet it and took bearish journey. Is it right? kindly let me know.

  7. thanks @@@@@@@@@

  8. In order to be considered a 2 bar reversal, it only has to close past either the half way point or the 3/4 point of the previous bar (depending on who you ask). You can see it in the last pic in this article.

  9. The higher the time frame, the higher the probability. Will still work in the micro times, just not as well as say the hourly, or daily.

  10. hw do yhu differenciate it frm an inside bar

  11. Meta Culate says:

    I assume the bar following the 2bar reversal needs to close higher or lower which will be the confirmation candle as we are seeing right now on the EURNZD 4hor chart at 11:05 pm french time, i am not sure if the trend is strong enough to call it a reversal candle.

  12. ulysse JB says:

    I assume the bar following the 2bar reversal needs to close higher or lower which will be the confirmation candle as we are seeing right now on the EURNZD 4hour chart at 11:05 pm french time, i am not sure if the trend is strong enough to call it a reversal candle.
    4/10/2014

  13. Golam Moktadir
    Twitter:
    says:

    Thank you for this easy to understand article on 2 bar reversal.

  14. Hello Johnathan

    what do you use to see if the market is overbought or oversold since you not using indicators

    Senzo

    • Hello Senzo,

      we use price action.

      When trading price action we need to approach the chart as the whole chart and not just the last candle or two like so many traders do. The reason this is so important is because it is the overall story and overall information of where we are entering and managing a trade from that is crucial.

      What overbought/oversold indicators try to do is tell traders when price has gone too far and will then revert back to some kind or mean level, but the reason these simply do not work is because they take no account of the market price action situation. Price may be saying it is overbought, but if there is a strong obvious clear trend in place, I am going to be looking for long trades every day of the week and not trying to fight an obvious trend.

      These overbought/oversold indicators are built of using the old historical price to make a lagging indicator.

      As just mentioned above; when looking for high probability setups; it is much more important to concentrate on looking for hunting for setups at value, then worrying if price is overbought or oversold and you can do this by concentrating or reading the price action.

      Johnathon

  15. hell John
    thank you John all clear

    Senzo

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