Identifying a reversal (trend change)

[schweiz]

Generally speaking, the larger the time frame you spot a signal on, the longer term the movement that will follow will be.

That's why I never watch tick charts, second charts and even minute charts in daytrading. The potential profit is not big enough in regard to the risk.
Newbies always want to get in and out quick as they are afraid or have no clue what the market will do. What they don't realize is that they increase the risk and reduce the potential profits.

To move the market on hourly charts requires much more volume then for moving the market in tick- or minute charts. And in tick- or minute charts lots of these "moves" are just noise or accidental moves..

 

[mlawson71]

That's why I never watch tick charts, second charts and even minute charts in daytrading. The potential profit is not big enough in regard to the risk.
Newbies always want to get in and out quick as they are afraid or have no clue what the market will do. What they don't realize is that they increase the risk and reduce the potential profits.

To move the market on hourly charts requires much more volume then for moving the market in tick- or minute charts. And in tick- or minute charts lots of these "moves" are just noise or accidental moves..

I agree. Unless you're scalping there's no point in watching the tick and minute charts, in my opinion.

 

[mr_byte31]

Very high volume with minor price change.

 

[padutrader]

How do you spot it? One way is a swing in the opposite direction and a test preferable touching the previous trendline. What are other known ways?

your question is rather interesting for what it does not ask :because though there are a few trend reversal signals, what is much more important is till where the reversal's ultimate destination is or will be.

without this information it is like getting on a bus or train without knowing it's ultimate destination.

A better question will be if a reversal signal occurs what is it exactly reversing,because that will be the target:if the reversal signal is reversing a one bar spike then the market will only go as far as the bottom of the spike.

In a strong trend you will see many reversal signals that do not go beyond the extreme of the bar and "fail";in reality they do not fail because that was the target for the reversal signal

Equally pertinent is where the signal takes place: if it occurs in channel, then the destination will be the extreme of the channel.
Since the market is always in a channel,sometimes the channel is so steep, it is called a spike or trend,most reversal signals result in what most traders would call insipid moves, and this has led some 'gurus' like Al Brooks,to say that most reversal signals fail.

This is totally wrong because the target was achieved and is always achieved.

A reversal signal does not usually result in big moves and the preoccupation of traders in identifying reversal signals suggests that many or most traders believe this is so.

 

[murray t turtle]

How do you spot it? One way is a swing in the opposite direction and a test preferable touching the previous trendline. What are other known ways?

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Weekly charts; monthly charts[ 12 months/52 weeks].............................................................

 

[cornerstone]

How do you spot it? One way is a swing in the opposite direction and a test preferable touching the previous trendline. What are other known ways?

along with technical analysis to see support and resistance areas, a majority of sellers/buyers can suggest a reversal. Bookmap heat map shows it the best.

 

[tommcginnis]

along with technical analysis to see support and resistance areas, a majority of sellers/buyers can suggest a reversal.

Errrrrrr, there are always a matching number of buyers and sellers. Every second of every day. And for everything sold in any market. Anything labeled as otherwise is thereby suspect, and undertaking an affirmative duty to explain its abuse of language. (e.g., "Online Trading Acad. & Storm-door Company -- which continually fails on this point.)

 

[LS1Z28]

it is a good idea....once you find a pattern and document it, go back to your historical charts and search for that same pattern and SEE HOW MANY TIMES THAT PATTERN APPEARED BUT FAILED TO REVERSE.
it has been my experience that every reversal 'pattern' fails 90% of the time it appears and this is the enigma of trading...but that is my experience......

If this is true, you must've made a fortune trading failed reversals.

 

[murray t turtle]

along with technical analysis to see support and resistance areas, a majority of sellers/buyers can suggest a reversal. Bookmap heat map shows it the best.

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Thats what i mean; that kind of volume gets in the way of price when i try to print the chart; another solution find something that goes down below that LOL. ITs not really correct; but a down day like today; i call all of that red sell volume on day chart/SPY, QQQ.

IF you look @ 5 hours intraday chart-not that simple,nor is it all one color volume, all the time.,.I like books+ maps more than any e chart, use both/all3.

 

[cornerstone]

Errrrrrr, there are always a matching number of buyers and sellers. Every second of every day. And for everything sold in any market. Anything labeled as otherwise is thereby suspect, and undertaking an affirmative duty to explain its abuse of language. (e.g., "Online Trading Acad. & Storm-door Company -- which continually fails on this point.)

The issue is at what price people will want to buy or sell, and that is what creating the reversal.
Bookmap shows the price range were there is an exhaustion of buyers or sellers, which can reflect a shift in the trend.