A chart formation that signals a potential change in the prevailing price trend direction. Common reversal patterns include head and shoulders, double tops, double bottoms, and rising or falling wedges. These patterns are used by technical analysts to anticipate and trade trend changes.
Example
“A trader spots a head and shoulders reversal pattern forming on the 4-hour EUR/USD chart, with the neckline at 1.0800, and prepares a short entry if price breaks below that level.”