Trend Reversal Trading Strategy

The easiest way to spot a trend reversal is using moving averages.

#trendreversal #forex #daytrading

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Simply put, a reversal occurs when a stock changes trend and starts to move in the opposite direction of previous price action. Psychologically, reversals can be incredibly difficult for even the most experienced investors to react to. That's because in the early stages of a reversal, the market still shows many indications of a continued move in the original direction.

The market meltdown of 2008 was a good example of a powerful downtrend that was difficult to spot the end of. While the lows of March 2009 are easy to spot with the benefit of hindsight, it was considerably more difficult to go long stocks in 2009 after the market had already punished bulls so fiercely in the preceding year.

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By the time skittish mainstream investors had piled onto the stock-buying game, a significant chunk of the market's initial move was already behind it. Improving reversal recognition is one remedy for that.

Naturally, markets aren't always trending. Quite often, markets can trade without a discernible direction.

How to Identify a Reversal Early

One of the most effective tools for spotting a reversal is also the most simple: the trend line. A trend line connects intermediate lows or highs of a stock; in an uptrend, it connects lows (or troughs), while in a downtrend it connects peaks.

The chart above of the S&P during 2008 is a perfect example of that. By relying on the long-term trend lines rather than gut feelings, you would have been out of the market early and back in early.

As with most technical tools, trend lines aren't set in stone; they're subject to adjustment as a stock's price action works itself out.

Momentum oscillators are another tool that can help you spot reversals. Oscillators are technical indicators that are banded between two extreme numbers or have a base value. These momentum gauges can signal overbought or oversold conditions when they're at extremes.

Common oscillators include RSI, MACD and Stochastics. Don't be fooled into common practice with oscillators. While a move to oversold or overbought territory does indicate a reversal could be forthcoming, it's actually quite common for stocks to keep running as momentum continues to accelerate.

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The information contained here and the resources available for download through this website is not intended as, and shall not be understood or construed as, financial advice. I am not an attorney, accountant or financial advisor, nor am I holding myself out to be, and the information contained on this Website is not a substitute for financial advice from a professional who is aware of the facts and circumstances of your individual situation.

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[mohaiminulhoque]

Bro this is one the simplest technique I noticed observing market for the last 8 months after testing thousands of strategies. This method truly works. Mark my words.

[nykel]

Just ran into your channel while searching for some in-depth looks on the basic indicators and scalping and you just blew my mind by how easily, humane and short you give your explanations! Subscribed! Keep up the good work!

[royreceno]

Man, you explain these things so simple and straight to the point. No BS prolonging the video. More people should subscribe!

[sterlo]

I was askin the universe to help me find a vid on trend reversals. The video length was 4:44. This info helped 💪🏽💪🏽

[AndresDCRealtor]

This CURVE you shared with me is a HUGE GAME CHANGER in my trading skills!!!! THANK YOU!!

[curtdegner]

I watched your trend reversal video the other day and set up Tradeview as you instructed. I have just started trading futures (/MNQ) and was having a problem getting out too early on my trades. Your setup shows exactly when to enter the trade and how long to stay in the trade. I made $190 today on a single position today and got out just as it was reversing. I looked back later and could have shorted it and made almost as much riding a short position down. This is an amazing tool. Thank you.

[lombardo]

I wish it was this simple. You are correct in practical terms but live trading in an account for some reason it never has smooth. lol Thanks anyways.

[Ironboots]

Love love love your vids. Short, sweet, and to the point. Rock on MA 👊🏽

[kristalroman]

Wow great video for beginners like myself. Thanks you for explaining everything simply and getting straight to the point. I wish there were more people like you on this platform 👍

[mohammedhadjsaid]

thanks for sharing, great indicator, but the SMMA 200 is very slow motion curve it will be too late to wait to see 200 SMMA showing some beginning curve.

[traderngbayan]

Can I suggest you use the replay option when explaining so we can see the action before it happens ;) would really make things easier

[pokimedubaivlogs]

always learning from u new things thanks

[tsglbwz]

Thanks. This looked very good. I have tte following questions. In place of the 3x SMA CAN ONE ALSO USE THE WILLIAMS ALLIGATOR. I ALSO WATCHED YOUR OTHER VIDEO USING FRACTUALS INSTEAD OF THE ENGULFING CANDLES. I KNOW YOU LIKE THE INGULFING CANDLES. WILL FOR SOME REASON THE FRACTUALS BE A BETTER OPTION. APRT FROM THIS THESE TWO STRATEGIES LOOKS VERY SIMILAR. BOTH LOOKS THE EASIEST AND SIMLE BUT GOOD.

[darrelljones]

Great info, I get confused sometimes on reversals, I think it's a retest, and I miss big reversals!

[guzsaputra]

i hit that thumb button right when u tell me to do cause i like this video, . thank you sir for the lesson

[rodneyboorman]

Arty you really are the best, I've been watching your videos for months now and that's why i recently joined the trdfloor.I want to learn from the best 👌

[emmanuelekukinam]

This is the best reversal trading explanation love it. What other timeframe is recommended apart from 1Minute chart you mentioned here.

[kenbear]

So glad I found your channel. Amazing info and insights!

[chillb]

Hi how come my fractal indicator only shows the triangle 2 candles later instead of when it closes?

[mybuddyclubmarketing]

This is so truth，I lost 24k did not set stop loss when Japan tsunami 311 on that day，I sell big without stop loss， and it jump up high pips ，even i try manually close the transaction，forex server failed to close more then 15 TIMES！ finally i lost 24k sighs。 Good article and i had experience it damm hard。