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Finding a Reversal Point

Reversal Trading Pays OffMarkets don’t just keep going up or down. They will have a tendency to continue in one direction, but they will never continue without pulling back. People talk about sticking with the trend and this is a solid mindset. However, many solid Binary trades will be left on the table if you don’t consider trading the reversals.

Tip of the Day – The longer the time frame you look at the stronger the Reversal Chances.

Reversal points on the markets can allow traders fast 60 second trades or even longer term trades. It’s up to the discretion of the trader to make an educated guess of what the asset will do. With so many assets to choose from, you will start to learn patterns each asset possesses. These patterns will dictate price action and where a price may reverse.

There is an exception to this rule. If momentum is too strong, you are better off steering clear. This will help you make better decisions after the big move is done. There is no need to catch a falling knife when you are really not sure what the price will do. If you see only strength or weakness then move on.

What to look for when it comes to reversals?
As price action traders there are a couple of things to seek. If you are a candlestick trader there is a reversal candle that is a good starting point. This DOJI candle or wick formation is a good place to go against the trend. These types of candles show weakness is starting to form. This doesn’t mean it will just stop.

The image below shows a Doji candle and then reversal of price in a pretty strong market. Trading against the trend in this case paid off nice for binary trading advocates and true Forex traders.

100 pip reversal

Price comes to a low on a Doji candle and jumps over 100 pips.

These dojis/hammers/stars are all good for picking turns in the market.

Another great area to consider for a reversal trade against the trend is the whole number. The whole number acts like a floor or ceiling. It has a hard time getting through. This make a trend changing trade more exciting. In our last trading post we talked about trading whole numbers. This can be traded with the trend or against.

The combination of a doji candle, wick and whole number is very powerful. These types of setups happen now and again, but when they do you should be ready to make your entry.

The power of a reversal trade is far greater than risking breakouts. You can get stuck in a breakout and not even know it when you’ve already lost a ton of money. Breakouts do occur, but until they do, a reversal trade at these break areas are a good place for entry.

Going forward, keep in mind of where price may go to next and consider a reversal trade.

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