Key points for judging reversal pattern signals
In trading, the key feature of a reversal pattern is that after the balance of the pattern is broken, the price fluctuation direction is opposite to the previous trend. To judge a true reversal signal, the following key points are required:
Obvious trend market: This is a necessary prerequisite for judging a reversal pattern. Before the reversal signal appears, the market must have a clear upward or downward trend. If the previous trend is vague, the possibility of the pattern becoming a reversal pattern is small. Note that the non-directional trend of sideways fluctuations is not a prerequisite for a reversal pattern.
Effective breakthrough of important trend lines: In the judgment of reversal patterns, this is an important signal, which means that the trend formed over a long period of time may reverse. In the process of completing most standard reversal patterns, the previous pressure line or support line will be effectively broken. If it is not broken, be wary of false reversals.
Volume requirements for bottom reversal: If the reversal signal appears at the bottom, the volume needs to gradually increase in the second half of the upward breakthrough. Reversal is often accompanied by huge volume. The better the volume and currency price match, the greater the possibility of reversal.
Influence of time span and fluctuation amplitude: The larger the time span and fluctuation amplitude of the reversal signal, the greater the fluctuation amplitude of the market. Generally, the longer the price reversal pattern takes to brew and the larger the fluctuation range, the higher the possibility of a large-scale market after completion.
Although there are reversal signals that can be summarized, market reversals are still unpredictable and accidental. In trading, you should always pay attention to trends, grasp the characteristics of trends, prepare for trading plan deployment, and be fully prepared for reversal markets.
