in the following text we take the reversals in downtrending markets in action but its basically the same but
vice versa for uptrends.
if you determined a level of interrest where you want to do buisness in ie. in the following cases at a
you have to understand first that price dosent care about YOUR Bar/Candle interval price moves independent of
time intervals. so a on the daily intervall and a reversal on that level may never be VISUALLY realized
on the but on much lower time intervals *but thats a topic for another article , we focus now on basic
reversals based on price behaviour .
and again each reversal presented in the chart has different market mechanics and market psychology at hands*
but then again on each setup shown in the chart there can be written whole articles which will be covered on a later
date. aswell as the markets arent black and white (which would be to easy ;) ) so there comes money/position and
risk management into play* which again will be adressed some date later.
so that aside lets dive into the reversals as in the words of richard wyckoff
A Reversal is nothing more then a change in trend based on a change in behaviour of supply and demand
Price only stops a decline if the buying holds support then we may conclude that demand is begining to overcome
supply, and that the next logical developement for final confirmation of a reversal will be the markets ability to rise
above the top of the last rally.
If an established which serve as a guide on the stride and pace of the price movement gets violated,
often but by any means not always may signify that the formerly force of supply or demand in effect is now becoming
exhausted. this may either mean that the price movement is merely changing its rate of progress , or it may mean that
the trend is definitely in danger of being reversed.
The actual violation of a often (but by no means invariably) may signify that the previously effective
force of supply or demand has been overcome by a new force which is causing a new trend to develop. However, as
before, we must look to the other accompanying symptoms for our decision as to whether this one indication alone
(i.e., the violation of a ) may be accepted as true or false.
It is bad practice to buy an Instrument simply because it has penetrated an established supply line or broken out of
an extended congestion area; or to sell it merely because it has violated a line of support or broken through the
bottom of a trading zone, and for no other reason. Do not forget: The breaking of a , by itself, is neither a
conclusive nor an all-inclusive symptom. The significant thing is HOW the line is broken; the conditions under which
the change of stride occurs. The behavior preceding such an indication must also be taken fully
In short, the quality of the buying or the selling at and around the point of penetration determines whether the
violation of an established stride may be regarded as evidence of a further movement in the direction of the
breakthrough, or whether it means only temporary change. This admonition applies equally to the violation of former
tops and bottoms and old levels of resistance and support.
If one doesn't understand trend, he’s going to have trouble understanding breakouts, retracements, and reversals. If
he doesn’t understand , he’s going to have trouble understanding how and where and when
to enter and exit, much less where to take profits.
more to come.....