Let’s look at a simple pattern that resulted from analyzing a certain type of reversal pattern: a bar that closes strongly in one direction is followed immediately by a bar that is similar in size but closes strongly in the opposite direction. The analysis indicated that such patterns occurred conspicuously at some tops and bottoms (with price moving in the direction of the second bar’s close) but were much more frequent in the middle of moves, where they were camouflaged by the fact that they did not signal reversals.

Since the second bar of this pattern represents a reversal of the first bar, why not see if there’s a way to enter the market on the first bar of the pattern and benefit from the second bar’s immediate reversal?