Setups & Trends: Trend Reversal Signals

Oct 3, 2022

Trend Reversal Signals

• Trend Reversal Signals (R) identify the potential end of a local trend and the beginning of a new one.
  
• Default (On). Default drop-down (Potential Reversal).
  
• All reversal signals are deemed POTENTIAL reversals until price action of the next one or two candles after the reversal signal confirms the reversal.
  
• Reversal signals may be CONFIRMED MANUALLY by a simple method described below or CONFIRMED AUTOMATICALLY using the Trend Reversal Signals drop-down menu.
  
• To manually confirm a potential bullish reversal, the close of the 1st or 2nd candle following the reversal candle must be greater than the high (wick) of the reversal candle.
  
• To manually confirm a potential bearish reversal, the close of the 1st or 2nd candle following the reversal candle must be less than the low (wick) of the reversal candle.
  
• To use automated confirmation capabilities, select either "1-Candle Confirmed" or "2-Candle Confirmed" from the drop-down menu.
  
• Selecting "1-Candle Confirmed" will result in any potential reversal signal (R) updating to a faded/transparent reversal signal (R) if not confirmed by the next candle only.
  
• Sometimes there is market indecision (i.e., sideways price action) after a potential reversal signal takes place, requiring the use of a 2nd candle to confirm the reversal.
  
• Selecting "2-Candle Confirmed" will result in any potential reversal signal (R) updating to a faded/transparent reversal signal (R) if not confirmed by the next one or two candles.
  
• Play the probabilities and avoid fake-outs: IGNORE any reversal signal not confirmed by the above method.
  
• Use the color selector boxes to change the bullish and bearish reversal signal colors.
  
• Always practice risk management: Use proper position sizing and a stop-loss on every trade.
  
  * This tutorial is intended for educational purposes only.