The Three Bar Reversal Pattern Indicator is a versatile tool for Forex traders aiming to identify potential market reversals with precision. Recognizing market turning points early can significantly improve trading results. This indicator is designed for MetaTrader 4 (MT4) and offers a clear, automated approach to spotting three-bar reversal patterns, giving traders an edge in both trending and ranging markets.

Three Bar Reversal Pattern Indicator showing bullish and bearish signals on MT4 chart
MT4 chart displaying bullish (green arrows) and bearish (red arrows) three-bar reversal signals.

What is a Three Bar Reversal Pattern?

The Three Bar Reversal Pattern is a classic candlestick formation used to identify potential trend reversals. It consists of three consecutive bars signaling a possible change in market direction.

Bullish Three Bar Reversal

  • Appears at the end of a downtrend.
  • First bar: bearish candle.
  • Second bar: makes a lower low but closes higher than the first bar’s close.
  • Third bar: confirms the reversal, often pushing the price higher.

Bearish Three Bar Reversal

  • Appears at the end of an uptrend.
  • First bar: bullish candle.
  • Second bar: makes a higher high but closes lower than the first bar’s close.
  • Third bar: confirms bearish momentum, signaling a potential top.

The indicator color-codes the bars (blue for bullish, brown for bearish) and can optionally display arrows and support/resistance dots, making it easier to visualize potential reversal zones.

Pro tip: Use a trend filter like a moving average or supertrend so you only trade reversals in the direction of the bigger trend. This avoids fading strong moves and minimizes false signals.

How to Trade with the Three Bar Reversal Indicator

Bullish Setup

  1. Look for a blue three-bar reversal forming near a support zone.
  2. Enter a buy trade once the pattern confirms.
  3. Place a stop-loss below the recent swing low.
  4. Target the next resistance or ride the trend using a trailing stop.

Bearish Setup

  1. Watch for a brown three-bar reversal forming near resistance.
  2. Enter a sell trade after confirmation.
  3. Place a stop-loss above the recent swing high.
  4. Take profit at the next support level or trail your stop.

Pro Tip: Use a trend filter like a moving average or SuperTrend to only trade reversals in the direction of the larger trend. This minimizes false signals.

Learn more about trend filters in our MT4 Trend Strategy Guide.

Why Traders Love the Three Bar Reversal Indicator

  • Clear visual signals: bars, arrows, and SR markers.
  • Built-in filters: trend and support/resistance reduce false signals.
  • Works on all timeframes: scalping, day trading, swing trading.
  • Customizable visuals: keep your charts clean and easy to read.
  • Perfect for entry timing: after pullbacks or fading exhausted trends.

This makes it not only a reversal spotting tool but also a reliable companion for price action traders who want structure without clutter.

Support and resistance zones on Investopedia.

Conclusion

The Three Bar Reversal Pattern Indicator for MT4 is a must-have tool for traders who want to improve reversal timing. By automatically detecting these classic formations and combining them with trend and support/resistance zones, it saves time and reduces guesswork.