A sharp sell-off that turns into an equally sharp rally with little or no basing. Common on news spikes and liquidation flushes in index futures.
How to identify it
- Steep, accelerating decline
- Abrupt turn with a long-wick or climactic low
- Recovery retraces most of the drop quickly
Entry
Buy once price reclaims the last lower high of the drop.
Stop loss
Below the spike low.
Target
The origin of the sell-off.
Invalidation
Price loses the reclaimed level and returns toward the low.
Does it work for you?
Textbook reliability means little until you know your own numbers. Tag your v-reversal trades in TradeZento and it shows your win rate, average win and loss, and P&L per trade for this pattern, so you know whether to keep it in your playbook.