Trend reversal candlesticks
Trend reversal candlesticks
Trend reversal candlesticks are by definition the candlesticks that form during a trend reversal.
They have no difference in length from the rest of the candlestick. The only difference is that
they form in the opposite direction of the prevailing trend in the market.
The trend reversal candlesticks are usually not many as compared to the rest of the candlesticks
that for the trend. Therefore if you look at a past history you will be able to clearly
distinguish trend reversal candlesticks from the candlestick in the main trend.
The trend reversal candlesticks will not go past the point at which the current trend began.
If that happens, then the trend is said to have changed.
Trendline break candlesticks
When a trader draws a trendline, he or she should then take note of every candlestick that forms past the trendline.
A trendline is there to show the current prevailing trend which the trader anticipates that it will follow the trendline.
If a candlestick forms past a trendline, then it is referred to as a trendline break candlestick.
The trendline break candlesticks are in most cases signals to place an order.
However, the order should be placed on the next candlestick that forms after the trendline break candlestick closes
(i.e. if the candlestick forms in the direction of trendlie break candlestick).
Measured moves on break out based on thin areas and on flags
The unpredictable upward move
(similar to a ‘flag pole’) followed by a retracement downward in an almost 450 angle is followed by a
‘measured move’ breaks back to roughly equal the original flag pole portion.
The same is the case with thin areas.
There are usually break outs outside the thin areas which are then followed by measured moves
to a place slightly within the thin area.
The measured moves are very important since they help the trader to determine the range within which to trade.
So if the trader places a trade he or she will be able to place his or her stop loss and take profit at the correct levels.
Break pullbacks and breakout tests
Breaks are one of the best chances that most traders look out for.
But as a trader, he or she should be very careful to detect any break pullbacks.
In many cases, the market usually has breakout tests before there is a real breakout.
A break pullback is a movement in the opposite direction just after the mart prices breaks out.
On the other hand, the breakout tests are in most cases characterised by break pullbacks and
the trader should be very careful to distinguish this from a trend change.
Due to these break pullbacks and breakout tests,
the trader should give the market time after a breakout occurs so as to be able to detect the break pullbacks and breakout tests.
Measured moves based on the first pullback
When a pullback occurs, the traders should be alert to detect if it is a real pull back or a trend change.
If a measured move occurs after a first pull back it is an enough sign that that was a retracement/pullback and not a trend change.
The first pull back is a rather risky signal to place any kind of a trade.
But if you have done some in-depth market analysis, then as a trader, you can place a trade.
When you place a trade following a first pullback, you should use a stop loss and a take profit.
This will minimize the risk margin and guard you against hue losses if any.