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The Key Reversal LE (Long Entry) and Key Reversal SE (Short Entry) strategies are price-action patterns designed to identify “exhaustion” points in the market. They attempt to catch the exact moment a trend loses steam and snaps in the opposite direction.

How Logic Works

These strategies rely on a specific two-bar relationship involving a “New High/Low” followed by a reversal in closing price.

1. Key Reversal (Long Entry)

This strategy identifies a “bottoming” tail where sellers have been exhausted.

• The Condition: The current bar must make a Lower Low than the previous bar, but then recover to finish with a higher Close than the previous bar’s Close.
• The Entry Signal: A Buy Stop order is placed at the High of the reversal bar plus 1 tick.
• The Goal: To enter a new uptrend just as the market rejects a previous low.

2. Key Reversal (Short Entry)

This strategy identifies a “topping” tail where buyers have run out of steam.

• The Condition: The current bar must make a Higher High than the previous bar, but then fail and finish with a lower Close than the previous bar’s Close.
• The Entry Signal: A Sell Short Stop order is placed at the Low of the reversal bar minus 1 tick.
• The Goal: To capitalize on a “bull trap” where the market briefly breaks out to new highs before collapsing.

Strategic Considerations

• Psychology of Reversals: These strategies work best when the market is overextended. The “Key Reversal” represents a failed attempt by one side of the market to push the price further.
• Filter Requirement: Because these can trigger frequently in choppy markets, they are often paired with a trend filter (like a long-term Moving Average) to ensure you are only taking reversals that align with the broader context.
• Bar Magnitude: The strength of the signal is often tied to the size of the “rejection.” A very small lower low followed by a slightly higher close is less significant than a deep plunge that recovers fully.