How to spot a Trend Reversal with Price Action
Many traders like to define a trend as a series of higher highs and higher lows, or a series of lower highs and lower lows.
In the chart, the price initially is in a down trend as indicated by the series of lower highs and lower lows.
First indication of a reversal is a break of the trend line.
The second and more important indication is the breach of the recent high and we created a higher high and subsequently a higher low.
The Trend is always your friend but the skill is to identify the correct direction of a trend or eventually a reversal.
In the chart, the price initially is in a down trend as indicated by the series of lower highs and lower lows.
First indication of a reversal is a break of the trend line.
The second and more important indication is the breach of the recent high and we created a higher high and subsequently a higher low.
The Trend is always your friend but the skill is to identify the correct direction of a trend or eventually a reversal.