# 1-2-3 Reversal 1-2-3 Reversal is an indicator on [Vela](https://vela.luxalgo.com/chart), our next-generation charting platform, written in Pine Script®. Detects the three-point trend-change setup on any chart: numbered pivot labels, a dashed trigger level at point 2 and a dotted invalidation level at point 1, built from a 5-bar swing rule with a close-based break by default. Six alerts cover formation, trigger and invalidation on both sides, for traders who want structural reversals called objectively. - Indicator in the LuxAlgo Library, by LuxAlgo, published May 29, 2026. - Access: free. - Concepts: [1-2-3 Reversal](https://www.luxalgo.com/library/concept/1-2-3-reversal/) (primary) - Open on Vela: https://vela.luxalgo.com/chart?pineScriptCodeId=t88at4lslatgysj0q6lqdg2d - Page: https://www.luxalgo.com/library/indicator/1-2-3-reversal/ **1-2-3 Reversal** detects, numbers and manages the classic three-point trend-change setup directly on the chart, the definitive clean build of the [1-2-3 reversal](https://www.luxalgo.com/library/concept/1-2-3-reversal/). An objective swing rule pins points 1, 2 and 3, the point 2 trigger level extends right as a dashed line, the point 1 invalidation level as a dotted one, and event labels tag the bar that completes or kills each setup. One candidate is tracked at a time: bullish setups hunted after a decline, bearish after an advance. ## How to Trade the 1-2-3 Reversal? - **Trigger level broken**: a break of point 2 (close or wick, per the break rule) completes the pattern, prints a Trigger label, turns the dashed level solid and flips the tracked trend. - **Invalidation level hit**: a fresh extreme beyond point 1 kills a formed candidate; with the keep option on, it fades to the invalidated color as a record. - **Stop placement**: point 1 is full invalidation; the optional point 3 level shows the tighter placement that risks less but gets clipped by noise more often. The build only starts counting once a trend worth reversing exists, filtering the endless candidates a sideways market prints. It slots in beside the other [market structure tools](https://www.luxalgo.com/library/family/market-structure/) reading the same pivots. ## 1-2-3 Reversal Settings - **Swing Length** (default 5): bars on each side a high or low must dominate to confirm a pivot. Around 2 gives a Williams-fractal-style rule; larger values build slower structures. - **Point 2 Break Rule** (default Close): Close demands a bar close beyond the trigger, filtering false pokes; Wick accepts any trade beyond it. - Display toggles: **Point Labels & Legs**, **Trigger & Invalidation Levels**, **Event Labels** and **Keep Invalidated Setups** (all on) plus **Point 3 Stop Level** (off) control what stays visible. ## Frequently Asked Questions ### How does the 1-2-3 Reversal compare to a Head and Shoulders? A [Head and Shoulders](https://www.luxalgo.com/library/indicator/head-and-shoulders/) needs five pivots and a neckline, so it arrives later with more structure behind it. The 1-2-3 is the smallest tradable reversal unit (three pivots and a trigger), earlier and more frequent at the cost of more failures. ### Do the drawings repaint? A forming setup can adjust: point 2 may extend and point 3 may follow a deepening pullback, since pivots confirm Swing Length bars after their extreme. Trigger and invalidation events fire on closed bars against levels already drawn, and resolved setups freeze. ### What alerts does this build include? Six, in bullish and bearish pairs: Setup Formed when point 3 confirms short of point 1, Reversal Triggered when point 2 breaks, and Setup Invalidated when point 1 gives way first. ## Related indicators - [Smart Money Concepts (SMC)](https://www.luxalgo.com/library/indicator/smart-money-concepts-smc/) (Break of Structure): markdown at https://www.luxalgo.com/library/indicator/smart-money-concepts-smc.md - [Structure & Trend Dashboard](https://www.luxalgo.com/library/indicator/structure-trend-dashboard/) (Break of Structure): markdown at https://www.luxalgo.com/library/indicator/structure-trend-dashboard.md - [FVG + Liquidity Sweep + CISD](https://www.luxalgo.com/library/indicator/fvg-liquidity-sweep-cisd/) (Change of Character): markdown at https://www.luxalgo.com/library/indicator/fvg-liquidity-sweep-cisd.md - [MSS Sweep Fib Retrace](https://www.luxalgo.com/library/indicator/mss-sweep-fib-retrace/) (Change of Character): markdown at https://www.luxalgo.com/library/indicator/mss-sweep-fib-retrace.md - [HTF CISD Projections](https://www.luxalgo.com/library/indicator/htf-cisd-projections/) (Change of Character): markdown at https://www.luxalgo.com/library/indicator/htf-cisd-projections.md - [HTF Sweep Signals](https://www.luxalgo.com/library/indicator/htf-sweep-signals/) (Swing Failure Pattern): markdown at https://www.luxalgo.com/library/indicator/htf-sweep-signals.md - [Liquidity Structure & Order Flow](https://www.luxalgo.com/library/indicator/liquidity-structure-order-flow/) (Break of Structure): markdown at https://www.luxalgo.com/library/indicator/liquidity-structure-order-flow.md - [Market Structure Break & OB Probability Toolkit](https://www.luxalgo.com/library/indicator/market-structure-break-ob-probability-toolkit/) (Break of Structure): markdown at https://www.luxalgo.com/library/indicator/market-structure-break-ob-probability-toolkit.md --- Source: https://www.luxalgo.com/library/indicator/1-2-3-reversal/ (LuxAlgo Library). Free to use with attribution: https://www.luxalgo.com/library/license/