Exhaustion Patterns

Exhaustion patterns are technical formations that suggest a current trend is losing its strength and is likely to end. These patterns often appear after a long, sustained move in one direction, signaling that the last of the buyers or sellers have entered the market.

Common examples include climactic volume spikes or specific candlestick patterns that indicate indecision. Recognizing these patterns allows traders to anticipate a reversal before it happens.

It is a critical skill for counter-trend traders who want to capture the start of a new move. However, they can be difficult to identify, and false signals are common.

They require confirmation from other indicators to be used effectively in a trading strategy.