In this THREAD I will explain “How to trade a TREND REVERSAL”
1. What is a "Reversal"
2. Bullish Reversal
3. Bearish Reversal
4. How to identify Reversals
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1. What is a "Reversal"
2. Bullish Reversal
3. Bearish Reversal
4. How to identify Reversals
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1. What is a "Reversal"
A reversal is a change in the price direction of an asset. A reversal can occur to the upside or downside.
Following an uptrend, a reversal would be to the downside.
Following a downtrend, a reversal would be to the upside.
A reversal is a change in the price direction of an asset. A reversal can occur to the upside or downside.
Following an uptrend, a reversal would be to the downside.
Following a downtrend, a reversal would be to the upside.
2. Bullish Reversal
The bullish reversal occurs when a bear trend stops and begins to move in the opposite direction.
Essentially when the market going down starts an upward trend instead.
The bullish reversal occurs when a bear trend stops and begins to move in the opposite direction.
Essentially when the market going down starts an upward trend instead.
3. Bearish Reversal
A bearish reversal pattern is a combination of candlesticks during an uptrend.
It indicates that the trend will reverse when the price falls.
In other words, the bearish reversal pattern indicates that sellers have taken over the buyers
A bearish reversal pattern is a combination of candlesticks during an uptrend.
It indicates that the trend will reverse when the price falls.
In other words, the bearish reversal pattern indicates that sellers have taken over the buyers
4. How to identify Reversals
Swing Points:
Price moves in waves. The start and end points of these waves are swing pivot.
Once you’ve marked swing pivots on a chart:
HH mean a Bullish trend, while LL mean a Bearish trend.
Swing Points:
Price moves in waves. The start and end points of these waves are swing pivot.
Once you’ve marked swing pivots on a chart:
HH mean a Bullish trend, while LL mean a Bearish trend.
4.1 How to identify Reversals
Trendlines:
A trend line defines and tracks a trend. Draw trend lines by connecting swing pivots
The basic signal of a trend reversal is when price breaks a trend line.
Trendlines:
A trend line defines and tracks a trend. Draw trend lines by connecting swing pivots
The basic signal of a trend reversal is when price breaks a trend line.
4.2 How to identify Reversals
Moving Average:
A trend trader can also find reversals with an intermediate to long-term moving average.
Use the 50-period moving average for longer trends.
For tracking shorter trends, you might want to use the 20-period moving average.
Moving Average:
A trend trader can also find reversals with an intermediate to long-term moving average.
Use the 50-period moving average for longer trends.
For tracking shorter trends, you might want to use the 20-period moving average.
4.3 How to identify Reversals
OBV:
If both price and OBV are rising, the bullish trend is solid. Once the OBV starts to lose steam, a reversal might be impending.
The background colour shows the slope of the OBV moving average (green means up and red means down)
OBV:
If both price and OBV are rising, the bullish trend is solid. Once the OBV starts to lose steam, a reversal might be impending.
The background colour shows the slope of the OBV moving average (green means up and red means down)
4.4 How to identify Reversals:
MACD:
As a trend strengthens, two moving averages of different periods will diverge. As a trend weakens, two moving averages will converge.
Use MACD is for finding price divergences. A price divergence is a powerful reversal signal.
MACD:
As a trend strengthens, two moving averages of different periods will diverge. As a trend weakens, two moving averages will converge.
Use MACD is for finding price divergences. A price divergence is a powerful reversal signal.
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