B2 Pattern Strategy: Make Profit from Trend Reversals

The B2 pattern strategy was popularized by Victor Sperandeo, a well-known trader and author, recognized for his expertise in trading and market analysis. It is a trading methodology focused on identifying trend reversals based on false breakouts. 

The strategy operates on the idea that if a price barely surpasses a recently formed high or low and then quickly reverses, this indicates that the market lacks the momentum to continue in the same direction. As a result, a larger correction against the prevailing trend is likely to occur, presenting an opportunity for profit.

The B2 pattern strategy is fairly simple to use, as it requires only price-action analysis with one trading pattern (the double top or double bottom) to take into consideration and requires no indicators to be plotted on the chart.

What can you trade with it?

The B2 pattern strategy is highly versatile and can be used on various financial instruments, including stocks, Forex, commodities, and indices. Essentially, any asset that displays clear trends and price movements can be traded using this strategy.

On what timeframes?

This strategy can also be employed in any timeframe, making it suitable for different trading styles, from day trading to swing trading. Whether you’re analyzing a 5-minute chart or a daily chart, the principles of the B2 pattern remain consistent. The specific timeframe you choose will depend only on your trading goals and how frequently you wish to enter and exit trades.

How to use the B2 pattern strategy

As previously said, the B2 pattern strategy relies only on price action and the identification of double tops/double bottoms. The trading algorithm is the following:

1. Identify a consolidation. Begin by identifying an area on the chart, where price moves in a range. This happens when equal highs and lows are formed.
2. Identify a tactical high or low. Price breaks out of the consolidation range, by forming a tactical higher-high or lower-low. This serves as a reference point for the next steps.
3. Observe price action. After the tactical high or low is established, observe the price to see if it pulls back slightly. This pullback is a natural correction in the market, indicating that the price is momentarily pausing its momentum, to retest previous areas of the trend.
4. Watch for a retest. Next, watch if the price attempts to retest the recently formed higher-high or lower-low. The key here is to see if the price edges just beyond this level but does not decisively break through it.
5. Look for a false breakout. If the price inches beyond the high or low and then quickly reverses, this is the critical moment. The false breakout suggests that the market does not have the strength to continue in the current trend and may enter a larger correction.
6. Confirm the reversal and enter the trade. Finally, once the reversal is confirmed by observing a few bars moving in the opposite direction of the newfound trend (formation of a double top/double bottom), you can enter your trade. The idea is to capitalize on the anticipated correction, profiting as the market moves against the prior trend.

By following these steps, the B2 pattern strategy helps traders anticipate potential trend reversals and position themselves to profit from subsequent market corrections.

B2 strategy: Bearish example

When a double-top forms, we look for a short position. The steps to profit from a short trade are:

1. Identify a consolidation.
2. Look for a breakout out of one of the range edges.
3. Wait for a correction and a retest of the recently formed higher-high.
4. See if after the retest price proceeds lower.
5. If the price continues lower, only then you can open your short position.
6. Stop-Loss: the SL must be placed above the two higher highs.
7. Take-Profit: the TP can be placed at the level of the last low price-action formed.

Sell signal

On the chart, we see the Daily EURUSD. From the end of November 2021 until January 2022, we identify a consolidation. After that, a double top is formed. The trend continues its bearish nature right until summer 2022. That was a B2 pattern strategy ‘sell’ signal.

B2 strategy: Bullish example

When a double-bottom forms, we look for a long position. The steps to profit from a long trade are:

1. Identify a consolidation.
2. Look for a breakout out of one of the range edges.
3. Wait for a correction and a retest of the recently formed lower low. A double bottom forms.
4. See if after the retest price proceeds higher.
5. If the price continues higher, only then you can open your long position.
6. Stop-Loss: the SL must be placed below the two lower lows.
7. Take-Profit: the TP can be placed at the level of the last high-price action formed.

Buy signal

On the chart, we see the Daily EURUSD. We identify a consolidation, going from the middle of August 2022 to the end of September 2022. After that, a double bottom forms. The trend changes upwards for a whole year, rallying until October 2023. That was a B2 pattern strategy ‘buy’ signal.

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