HOW TO SPOT A REVERSAL

Let's see how the characteristics of a reversal and a pullback differ.

📈 A pullback:
- Usually occurs after a strong price movement;
- It does not last long;
- The fundamental (macroeconomic) data does not change;
- In an uptrend there are hints of its continuation, similarly for a downtrend.

📉 Reversal:
- Can occur at any time;
- Long term;
- The fundamental data is changing it is often the reason for the reversal;
- In an uptrend there is no hint to its continuation, the buyers' strength decreases (and vice versa for a downtrend).

Unfortunately, there are of course no guaranteed methods to determine where there is a pullback and where there is a trend. I would buy this one for any money, and everyone would buy it. That is why it is determined by a number of different instruments, from a simple multiframe analysis and trend lines to various systems.

🔴Reversal: Fibonacci Levels
Although I myself am not a fan of Fibonacci levels and its many counterparts, it seems that everyone uses them but me. Let's listen to the practitioners of this tool, since the market likes it so much. According to them, statistically, pullbacks most often occur at levels 38.2%, 50% and 61.8% those Fibonacci retracement levels.

If price broke through those levels, it could very well be a trend reversal. But technical analysis is not science, so we will always deal with probabilities. In the case of Fibonacci, pullbacks are identified like this:
As you can see, each pullback tests a certain level before reversing further along the trend. And this repeats itself. But if price were to confidently break through these levels one after the other, that would indicate a long-term reversal.


🔴Reversal: Pivot Points
Another method of determining the reversal is the use of the pivot points. In an uptrend, the lower support points (S1, S2 and S3) will act as conventional levels, breakout of which can indicate a change of trend, but not a reversal. And vice versa for resistance points (R1, R2 and R3).
Breakdown of these levels is another hint to a reversal.

🔴Reversal: Trend Lines
Trend lines are generally an elementary method of determining if a trend has changed or if it is a pullback. If you combine trend lines with candlestick combinations and price action patterns, you can get really impressive results.

🔴Reversal: Price Highs and Lows
Finally, my favorite method for identifying pullbacks and reversals is to use the basis of Dow theory: price lows and highs.
The simplest technique for this is described by Martin Pring.
Pring gives the simplest explanation that improves the basic understanding of any market.

📊Market condition of price
As you can see, using simple techniques, we can build up practical decision options for determining whether price is reversing or going further along the trend. Trends, pullbacks, and consolidation are the three pillars of any market. I also advise you to be extremely attentive to candlestick combinations in reversal zones, whether it be trend lines , pivots , or other tools.

Study them. Keep screenshots. Look for them on the history. Do not be lazy. This is the only way to learn, over time, to better identify price behavior. At some point, you will feel it on an intuitive level. But this is just a continuation of your trading practice, which has moved, after many months of practice, to a new level.

Experienced drivers don't think about when to squeeze the clutch and when to change the gear stick. Not only that: they can even feel the dimensions of the car. Seemingly unbelievable thing: you are inside and you feel that there is 5 cm from the bumper to the sidewalk. In trading, you just have to reach a similar level of intuitive perception based on hours of theory and practice. Therefore, the specific instrument is not so important. Much more relevant is your level of proficiency in it.