Today, I'm here to share an extremely practical trading strategy: 'Trend Reversal Trading'. Its core idea is very simple: under the premise that a trend has already formed, find a better entry point to lower your risk and increase your margin for error!
Remember, first determine the direction, then look for the position!
The following three methods are the most classic trend reversal trading methods:
Support and Resistance Switching: Confirming the pullback after the breakout
Imagine this: the stock price breaks through a historical high point (resistance level). At this moment, the role of this high point changes from 'resistance' to 'support'.
Operation method: When the stock price retraces and re-tests this new support level, if it stabilizes here without breaking down, this is called **'pullback confirmation'**.
Signal meaning: This indicates that buyers in the market are willing to take over at a higher price, which is a very strong buy signal.
Fibonacci 0.618: The last line of defense for bulls
Fibonacci retracement is one of the most magical tools in technical analysis, and 0.618 is often seen as the last line of defense for a bullish trend.
Operation method: If the stock price retraces to around the golden ratio of 0.618 and forms a candlestick pattern like a doji or hammer at this point.
Signal meaning: This means the bears' probe has failed, and the bulls begin to launch a counterattack. This is a pretty good buying opportunity.
