1-2-2 Reversal Patterns

In strat patterns, when an inside bar is followed by a directional candlestick, and then the price reverses in the opposite direction in the form of another directional bar. A 1-2-2 reversal pattern occurs on the chart. This pattern will change the direction of the prior trend. 

You can also say 1-2-2 a fakey pattern because market makers trap the retail traders in the form of 1-2-2 pattern. I will explain the pattern behind these candlesticks in the post below.

On the basis of a trend reversal, the 1-2-2 pattern is categorized into two types:

• 1-2-2 Bullish trend reversal 
• 1-2-2 Bearish trend reversal 

I will explain this in complete detail with examples. so make sure to read the full post without skipping any step. 

1-2-2 Bullish trend reversal pattern

When an inside bar or scenario 1 is followed by a 2U candlestick and a 2D candlestick form, making a low, then a 1-2-2 bullish trend reversal occurs in the market. This pattern will change the bullish trend into a bearish one. 

Mostly, 1-2-2 bullish reversal will occur at the top of the trend or key levels. If it occurs within a ranging market, then we should avoid trading this pattern.

Here are the few steps to follow to identify a high probability 1-2-2 bullish reversal pattern:

1. Find an inside bar pattern or scenario 1 at the top of the trend or resistance or supply zone. Scenario 1 should not form within the ranging market.
2. Then, a 2U directional bar should form, breaking the high of the previous inside candlestick. it must not break low. This price pattern will also represent that the price has broken a key level or support zone. However, in reality, this will be a fakeout by market makers. 
3. Now, a 2D directional bar will form, breaking the low of the previous candlestick. This confirms that a 1-2U-2D reversal pattern has been formed, and now the trend will change from bullish to bearish.

The entry point of this pattern will be at the break of the low of the 2U candlestick, and the take profit will be at the low of the last mother candlestick (before the inside bar). I will explain the trading strategy (entry, exit, take profit) in the upcoming posts. 

1-2-2 Bearish trend reversal pattern 

When an inside bar or scenario 1 is followed by a 2D candlestick, and next, a 2U candlestick form that breaks the high of the previous 2D bar, then a 1-2-2 bearish trend reversal occurs on the chart. This pattern will change the prior bearish trend into a bullish one.

To identify the 1-2-2 bearish reversal, follow the following steps: 

1. Find scenario 1 at the bottom of the trend or the support or demand zone.
2. Now, the next price should break the low of the inside bar, making a 2D directional bar. 
3. Next, a 2U candlestick should form, breaking the high of the previous 2D candlestick. This will show us that the last continuation trend was a fakeout, and the trend has been reversed from a bearish to a bullish direction.

I hope now you will be able to identify these two patterns quickly on the chart. Now, let’s analyze some examples. 

Examples

Here are a few examples of 1-2-2 reversal patterns. 

Also check the image below. The break of support zone acts as a trap for retail traders. after breakout retail traders will open sell orders however price will reverse.

The psychology behind the 1-2-2 reversal pattern 

In the strat patterns, we only find the different patterns of candlesticks. However, we must know the activity of big traders during the formation of these patterns. This understanding will help us make good decisions during live trading.

When an inside bar forms at a key level, then this shows that the market is in the indecision phase. Market makers are deciding on the future direction, either to continue the previous trend or reverse it. When a directional bar forms, retail traders are confirmed about trend continuation, but the next candlestick reverses the trend. This shows that the previous trend continuation signal was a trap and false breakout. However, in reality, they want to reverse the trend. So, by following a 1-2-2 pattern, we can follow the big players. 

The bottom line

In trading, if you want to become a successful and profitable trader, then you can achieve this only by following big players. If you are trading against them or following retail traders without any rules/regulations, then you’ll permanently lose in the trading market. 

The strat trading helps us to follow the market makers. By learning the strat patterns, you can become a successful trader.

I recommend that you properly backtest the 1-2-2 reversal pattern at least 50 times to make a firm grip on this pattern. 

If you have any questions regarding strat patterns, remember to comment below.