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What is Trend Reversal in Trading? Technical Analysis

Forex Educational Video Series

Author: Andreas Thalassinos (BSc, MSc, MSTA, CFTe, MFTA), Head of Education at FXTM.

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!

Disclaimer: This written/visual material is comprised of personal opinions and ideas. The content should not be construed as containing any type of investment advice and/or a solicitation for any transactions. It does not imply an obligation to purchase investment services, nor does it guarantee or predict future performance. FXTM, its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness of any information or data made available and assume no liability for any loss arising from any investment based on the same.

Risk Warning: There is a high level of risk involved with trading leveraged products such as forex and CFDs. You should not risk more than you can afford to lose, it is possible that you may lose more than your initial investment. You should not trade unless you fully understand the true extent of your exposure to the risk of loss. When trading, you must always take into consideration your level of experience. If the risks involved seem unclear to you, please seek independent financial advice.

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