How likely Reversal is ?
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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. Reversals are based on overall price direction and are not typically based on one or two periods/bars on a chart.
Reversals typically refer to large price changes, where the trend changes direction. Small counter-moves against the trend are called pullbacks or consolidations
When it starts to occur, a reversal isn't distinguishable from a pullback. A reversal keeps going and forms a new trend, while a pullback ends and then the price starts moving back in the trending direction.
What Does a Reversal Tell You?
Reversals often occur in intraday trading and happen rather quickly, but they also occur over days, weeks, and years. Reversals occur on different time frames which are relevant to different traders. An intraday reversal on a five-minute chart doesn't matter to a long-term investor who is watching for a reversal on daily or weekly charts. Yet, the five-minute reversal is very important to a day trader.
An uptrend, which is a series of higher swing highs and higher lows, reverses into a downtrend by changing to a series of lower highs and lower lows. A downtrend, which is a series of lower highs and lower lows, reverses into an uptrend by changing to a series of higher highs and higher lows.
Trends and reversals can be identified based on price action alone, as described above, or other traders prefer the use of indicators. Moving averages may aid in spotting both the trend and reversals. If the price is above a rising moving average then the trend is up, but when the price drops below the moving average that could signal a potential price reversal.
Trendlines are also used to spot reversals. Since an uptrend makes higher lows, a trendline can be drawn along those higher lows. When the price drops below the trendline, that could indicate a trend reversal.
If reversals were easy to spot and to differentiate from noise or brief pullbacks, trading would be easy. But it isn't. Whether using price action or indicators, many false signals occur and sometimes reversals happen so quickly that traders aren't able to act quickly enough to avoid a large loss.
S&P 500 Corrected 50% of the gains of a 74 days period in 11 days:
What do you think?
Is this a correction or an early stage of a reversal?
write comments and mention your reasons.
Best,
Moshkelgosha
Reference article:
https://www.investopedia.com/terms/r/reversal.asp
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. Reversals are based on overall price direction and are not typically based on one or two periods/bars on a chart.
Reversals typically refer to large price changes, where the trend changes direction. Small counter-moves against the trend are called pullbacks or consolidations
When it starts to occur, a reversal isn't distinguishable from a pullback. A reversal keeps going and forms a new trend, while a pullback ends and then the price starts moving back in the trending direction.
What Does a Reversal Tell You?
Reversals often occur in intraday trading and happen rather quickly, but they also occur over days, weeks, and years. Reversals occur on different time frames which are relevant to different traders. An intraday reversal on a five-minute chart doesn't matter to a long-term investor who is watching for a reversal on daily or weekly charts. Yet, the five-minute reversal is very important to a day trader.
An uptrend, which is a series of higher swing highs and higher lows, reverses into a downtrend by changing to a series of lower highs and lower lows. A downtrend, which is a series of lower highs and lower lows, reverses into an uptrend by changing to a series of higher highs and higher lows.
Trends and reversals can be identified based on price action alone, as described above, or other traders prefer the use of indicators. Moving averages may aid in spotting both the trend and reversals. If the price is above a rising moving average then the trend is up, but when the price drops below the moving average that could signal a potential price reversal.
Trendlines are also used to spot reversals. Since an uptrend makes higher lows, a trendline can be drawn along those higher lows. When the price drops below the trendline, that could indicate a trend reversal.
If reversals were easy to spot and to differentiate from noise or brief pullbacks, trading would be easy. But it isn't. Whether using price action or indicators, many false signals occur and sometimes reversals happen so quickly that traders aren't able to act quickly enough to avoid a large loss.
S&P 500 Corrected 50% of the gains of a 74 days period in 11 days:
What do you think?
Is this a correction or an early stage of a reversal?
write comments and mention your reasons.
Best,
Moshkelgosha
Reference article:
https://www.investopedia.com/terms/r/reversal.asp
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