Identifying intraday trend reversals: points you must know


Identifying intraday trend reversals are the most powerful tool for holding a position, buying or exiting from the trade. Here are the points you must know.

AtoZ Markets – Traders have a manifestation for attempting to pick a market top or bottom - this is like trying to catch a falling knife. It can downright unsafe and not normally recommended. You’ve probably heard the quote - “The trend is your friend until the end”. Intraday trading is the act of buying or selling a financial asset during a trading session and to be the exit at that same session. In the case of binary options, that means choosing an option with an expiration that is shorter than 1 day.

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Identifying intraday trend reversals

As we know, all trading strategies are not perfect with day trading. With regards to day trading, a standout amongst the best procedures is distinguishing reversals. Two simple approaches to spot trend reversals are by drawing pattern lines and analyzing candlestick patterns.

One of the most basic tools in technical analysis is drawing trend lines. To identify the trend over a defined period of time, draw an uptrend line connecting the valleys of upward price momentum and draw a downtrend line connecting the peaks of downward price momentum. Trend following strategies is one effective way to trade.

reversal

The key to identifying a reversal is by first establishing the trend line. Once a trend has been identified, then go ahead and wait for the trend line to be broken. Although the thought of waiting for candlestick confirmation can seem pointless, it is useful to prevent misidentification of a reversal.

Moreover, if an uptrend line is broken to the downside and the candlestick for the time period closes below the trend line, this marks an ideal opportunity to go ahead and establish a Put position in anticipation of further downside. If a downtrend line is broken to the upside and confirmed by a candlestick close above the trend line, this would indicate a wise place to initiate a Call position expecting additional upside.

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