The impact of the reversal signal on the price action

Knowing the effects of trend reversals will help traders make better trading decisions. The reversal signals have many different effects such as:
Reversal signals can have different effects such as:
  • Temporarily adjusted price
Maybe it will go sideways or do a slight rally and then correct in line with the trend. During this time, a flag or triangle pattern usually appears as a temporary correction signal. However, if the correction takes too long, it becomes a sideways price zone.
  • A deeper recoil
  • Reverse
  • Going sideways within a range
Also, one thing to keep in mind is that reversals on higher timeframes are usually more reliable. It has a strong effect on price action and increases the rate of reversals more.

Another note is that reversal signals or reversal patterns take time to become valid. That means the signs of reversal appear, but the market will need time to show that. As shown below:

The wedge pattern formed for a long time before it actually reversed.

Below is a list of a few typical reversal signals that traders need to grasp.

Reversal signal

1. Divergence: A weakening trend is a typical sign of a reversal. And divergence is a signal that the trend momentum has weakened.

2. Reversal candlestick patterns: Pinbar or engulf candles are typical reversal patterns. The candlestick pattern shows that the traders against the trend are entering the market.

3. Support and resistance: You can identify support and resistance through the Fibonacci, trendline, bottom peak, average line, tension zone, supply-demand zone, circle number area,….

4. Reversal price patterns: such as head and shoulders, head, rising wedge, falling wedge, 2 peaks, two bottoms, three peaks, three troughs, ...

5. Market structure changes: a bull market needs to ensure that the top and bottom are higher than the first. If the trend does not ensure this, then there will be a change in the trend and if the price forms a bearish structure, a reversal is likely to be higher.

6. Trendline is broken: However, the break of the trendline is not a sign of a strong reversal, but exactly the meaning of the trendline break is showing us, the trend has changed. We need to pay more attention to the market.

7. The breakout of an important bottom in the trend.

8. Rely on the Elliott wave to grasp the possibility that the market is at the end of the trend.

9. The momentum of the whole trend is weakening and the momentum of the opposite side is increasing.

These 9 signals of reversal are very typical and you will see them regularly on the chart. Since trends in the forex market are often unsustainable, trend reversals are quite frequent. These 9 signs can partly help you to be more proactive in trading, to catch the early change of trend to plan your trading.

▶️Telegram :
📚Edu Station :
⛑Support Form :