# Three-bar Reversal A Chart & Candlestick Patterns concept (Single/multi-bar (western)) in the LuxAlgo Library, with 2 indicator implementations. ## What is a Three-bar Reversal? A three-bar reversal is the smallest complete turn a chart can print. In the bullish form, a down bar is followed by a bar that makes the lowest low of the sequence, and then a third bar that closes back above the middle bar's high. The middle bar's extreme becomes a local pivot, the same geometry as a strength-one [swing low](https://www.luxalgo.com/library/concept/swing-high-low/), and the third bar's close is the confirmation that the probe lower found no follow-through selling. The bearish version mirrors this at a high. The pattern is bar-chart vernacular rather than any single author's invention: three-bar and N-bar reversal rules appear throughout systems literature because they are the minimal mechanical encoding of a pivot plus confirmation. The candlestick tradition tells the same story with body rules, its [morning star](https://www.luxalgo.com/library/concept/morning-star/) adding requirements about candle anatomy that the bar-count version deliberately omits. Definitions vary in strictness: some sources require the third bar to close above the highs of both preceding bars, others only above the middle bar's high, and some add rules about where the middle bar must close. Looser and tighter cousins exist as the [two-bar reversal](https://www.luxalgo.com/library/concept/two-bar-reversal/) and N-bar generalizations; all encode the same probe-and-reject logic at different confirmation costs. Grading the pattern is grading its three acts. A middle bar that probes deep, ideally through a prior low where stops rested, and closes off its extreme carries more information than a shallow dip; a third bar that closes strongly, approaching a [wide-range bar](https://www.luxalgo.com/library/concept/wide-range-bar/), confirms with conviction rather than technicality; and location decides whether any of it matters, since the identical sequence mid-range is scan noise. The strictness dial exists precisely to trade frequency against quality. ## How to identify a three-bar reversal The bullish case is described; invert every element at highs. 1. Require a decline into the pattern: the first bar continues the existing leg lower. 2. Find the middle bar: the lowest low of the three, the probe that defines the pivot. 3. Demand the confirmation close: the third bar closing above the middle bar's high (stricter rule sets require it above both prior bars' highs). 4. Grade the anatomy: a deep probe that closes off its low, and a third bar with a strong, wide close, upgrade the signal. 5. Weight the location: at a tested level, after a sweep of an obvious low, or at a pullback within an uptrend, the trigger means something; mid-range it rarely does. 6. Set the reference points: entry on the third bar's close or a break of its high, stop beyond the middle bar's low. ## How traders use it - As an entry trigger at a location: a bullish three-bar reversal printing into support, a value-area edge, or a pullback within an uptrend, entered on the third bar's close or a break of its high. - As an invalidation anchor: the middle bar's extreme is the natural [structure stop](https://www.luxalgo.com/library/concept/structure-stop/); if price trades back through that pivot, the reversal premise is gone. - As a scan primitive: the definition is fully mechanical, so it codes cleanly, but raw signals without a location or trend filter fire constantly and degrade accordingly. - As the confirmation layer over sweeps: a middle bar that runs a prior low before the third bar closes back through the sequence converts the pattern into a bar-count reading of the sweep-and-reclaim trade. - As a family member among reversal triads: scanners often flag the same turn as a three-bar reversal, a [morning star](https://www.luxalgo.com/library/concept/morning-star/), or a middle-bar [hammer](https://www.luxalgo.com/library/concept/hammer/) with confirmation, and the overlap itself (several definitions agreeing) is a usable quality score. ## Three-bar Reversal vs related reversal patterns - **Two-bar Reversal** (https://www.luxalgo.com/library/concept/two-bar-reversal/): The two-bar version demands immediate, symmetric commitment: strong bar one way, strong bar back. The three-bar form inserts the probe bar between them, so it fires later with an extra bar of evidence and a natural pivot for the stop. - **Morning Star** (https://www.luxalgo.com/library/concept/morning-star/): The morning star is the candlestick telling of the same three acts, with body-size and position rules replacing the bar-range rules. Many prints satisfy both definitions; the bar version is looser and easier to code, the candle version stricter about anatomy. - **Hammer** (https://www.luxalgo.com/library/concept/hammer/): A hammer compresses probe and rejection into one candle, then waits for confirmation. The three-bar reversal spreads the same event across the sequence and builds the confirmation into its third bar, trading immediacy for a completed trigger. ## FAQ ### What is the difference between a three-bar reversal and a swing low? The geometry overlaps: a bar with higher lows on both sides is a strength-one swing low either way. The three-bar reversal adds a close-based rule, the third bar closing back above the middle bar's high, which turns a pivot that can only be labeled after the fact into an explicit trigger with a defined confirmation bar. ### Is a three-bar reversal reliable on its own? No. Three-bar sequences appear constantly on every timeframe, and most mark nothing but noise. The pattern earns its keep as a timing trigger once something else frames the trade: a level, a higher-timeframe trend, a sweep of an obvious low. Confirmation on the third bar narrows the trigger; it does not make the reversal likely by itself. ### How does a three-bar reversal differ from a morning star? Same skeleton, different rulebook. The morning star is defined on candle bodies: a long bearish body, a small star body, a strong bullish close into the first body. The three-bar reversal is defined on ranges and closes: lowest low in the middle, third close above the middle bar's high. The bar version accepts prints the candle version rejects, and vice versa at the margins. ### Should the third bar close above one high or both? That is the strictness dial. Closing above the middle bar's high is the common minimal rule, cheap and frequent; requiring a close above both prior highs (or above the first bar's open) trades frequency for conviction. Neither is canonical. What matters is fixing one rule, testing it at the locations you trade, and not renegotiating it print by print. ### Which timeframes does the pattern work on? It prints identically everywhere, from one-minute to monthly, and means more where each bar summarizes more trade. Intraday, the pattern is so frequent that location filters do nearly all the work; on daily and weekly charts, qualifying sequences are rarer and the middle bar's probe often coincides with a meaningful sweep. The mechanics are scale-free; the signal density is not. ### How do sweeps upgrade a three-bar reversal? When the middle bar's probe runs through a prior swing low or equal lows, the pattern stops being merely geometric: the probe collected resting stops, and the third bar's close back through the sequence certifies the market rejected those prices. That is the bar-count expression of the sweep-and-reclaim logic, and many traders only take the pattern when the middle bar swept something identifiable. ## Implementations in the Library - Three Bar Reversal Pattern (LuxAlgo): https://www.luxalgo.com/library/indicator/three-bar-reversal-pattern/ - N Bar Reversal Detector (LuxAlgo): https://www.luxalgo.com/library/indicator/n-bar-reversal-detector/ ## Related concepts - Two-bar Reversal: https://www.luxalgo.com/library/concept/two-bar-reversal/ - Pin Bar: https://www.luxalgo.com/library/concept/pin-bar/ - Inside Bar: https://www.luxalgo.com/library/concept/inside-bar/ - Outside Bar: https://www.luxalgo.com/library/concept/outside-bar/ - Engulfing Bar: https://www.luxalgo.com/library/concept/engulfing-bar/ - Exhaustion Bar: https://www.luxalgo.com/library/concept/exhaustion-bar/ - Hikkake: https://www.luxalgo.com/library/concept/hikkake/ - Classic Bar Setups: https://www.luxalgo.com/library/concept/classic-bar-setups/ - Wide-range Bar: https://www.luxalgo.com/library/concept/wide-range-bar/ --- Source: https://www.luxalgo.com/library/concept/three-bar-reversal/ (LuxAlgo Library, the encyclopedia of trading & technical analysis). Free to use with attribution: https://www.luxalgo.com/library/license/