What is Trend Reversal in Forex Trading?
A trend reversal marks the end of an existing trend and the beginning of a new one. A reversal may happen in any timeframe and can mean the difference between a big win, a break-even, or a loss. Being able to effectively spot a reversal is the fastest way to “jump” on a new trade. As we have seen in previous videos, a trend is the direction of successive tops and successive bottoms. An example of a popular reversal is the Head and Shoulders. The Head and Shoulders reversal is formed at the end of an uptrend. The highest top is the Head. The top to the left of the Head is the Left Shoulder and on the right is the Right Shoulder. The line that connects the last two bottoms is known as the neckline, which acts as support. A break below the neckline forms the reversal pattern of Head and Shoulders that marks the end of the uptrend and the beginning of a downtrend. We’ve got one more Technical Analysis Basics video in store for you – see you then!
