The 3-Day Chart Reversal Strategy is a powerful swing trading method focused on identifying major turning points in price using a combination of candlestick analysis, momentum divergence, and trend exhaustion signals on the 3-day chart. This timeframe filters out short-term noise while offering timely signals that often precede significant multi-week reversals.

Traders use this strategy across forex, indices, commodities, and cryptocurrencies, especially around macro events, overbought/oversold zones, or long-term resistance/support levels.

Why the 3-Day Chart?

• Provides a clearer macro perspective than daily charts
• Offers early reversal signals ahead of weekly confirmation
• Captures inflection points that lead to multi-session swings
• Perfect for patient traders who want fewer, higher-quality setups

Strategy Framework

• Timeframe: 3-day chart (3D)
• Trade Duration: 1–3 weeks
• Market Focus: Forex majors, gold, oil, stock indices, BTC/USD
• Candle Close Checkpoints: Every third day — align review with global session closes

Indicators and Tools

• RSI (14): To identify bullish or bearish divergence
• MACD: For momentum confirmation and crossovers
• Candlestick Patterns: Reversal setups (pin bar, engulfing, three-bar reversal)
• Price Action Zones: Previous swing highs/lows, trendline confluence, or psychological levels

Entry Criteria

1. Price Reaches a Key Level
   • Long-term support/resistance
   • Round numbers (e.g. 1.1000 in EUR/USD, 150.00 in USD/JPY)
   • Fibonacci retracement levels (61.8%, 78.6%)
2. Reversal Candlestick Appears
   • Bullish engulfing or hammer (for longs)
   • Bearish engulfing or shooting star (for shorts)
   • Follow-through or confirmation candle next period
3. Momentum Divergence
   • RSI divergence (price makes new low/high, RSI does not)
   • MACD histogram divergence or signal line crossover
4. Volume Spike or Structure Confirmation
   • Ideally a surge in volume or wick rejection
   • Break of counter-trendline or 3-bar confirmation helps strengthen setup

Entry and Stop Management

• Entry: After reversal confirmation candle closes
• Stop-Loss: Below/above swing low/high or technical invalidation level
• ATR (14) on the 3-day chart can be used to define buffer range

Profit Targets

• TP1: 1.5x risk at nearest structural level
• TP2: 2.5–3x risk or opposite side of prior range
• Use trailing stop for strong trend reversals

Example: EUR/USD Reversal Setup

• EUR/USD hits 1.0450 (multi-month support)
• 3-day chart prints bullish pin bar followed by bullish engulfing
• RSI shows bullish divergence; MACD begins to turn upward
• Entry: 1.0480, Stop: 1.0380, TP1: 1.0620, TP2: 1.0750
• Trade runs for 2.5 weeks with full targets reached

Risk Management

• Risk 1% per setup, using fixed or ATR-based stop
• Maximum 2 correlated trades (e.g. not EUR/USD and GBP/USD together)
• Reassess if invalidation level breaks
• Don’t rush entries — wait for full candle confirmation

Ideal Market Conditions

• Extended trends or parabolic moves
• Oversold/overbought conditions
• Event-driven extremes (e.g. post-NFP spike, central bank surprise)
• Key technical level retests

Best Pairs and Markets

• Forex: EUR/USD, GBP/JPY, USD/CHF, AUD/USD
• Commodities: Gold, Silver, Crude Oil
• Indices: S&P 500, DAX, NASDAQ
• Crypto: BTC/USD, ETH/USD (best on extreme moves)

Advantages of the 3-Day Chart Strategy

• High-quality, low-frequency setups
• Captures large reversal moves
• Less screen time, more clarity
• Effective risk/reward structure
• Strong edge when combined with macro themes

Limitations

• Few signals per month — patience required
• Late entries in fast reversals if not anticipated
• Requires discipline to wait for full candle closes

Conclusion

The 3-Day Chart Reversal Strategy is an ideal choice for traders who value clarity, precision, and high reward potential over quantity. By combining momentum divergence with powerful candlestick patterns, this method consistently identifies major turning points across currency, commodity, and index markets.

To learn how to build structured reversal systems, integrate macro context, and trade inflection points with confidence, enrol in our swing-focused Trading Courses tailored for medium-term and high-conviction traders.