Identiffy Reversal (1)

Successful hedge fund managers, for example Bruce Kovner, Ed Seykota and John Henry happen to be stalwarts of trend trading for a long time. This approach is probably the most reliable trading methods devised for all those seeking outsized returns. It features a proven history of producing large profits in from stock indexes to orange juice. Additionally was, perhaps most famously, the tactic used using a relatively well-known number of average people that Richard Dennis became profitable traders, referred to as


But, at some point, all good things must end, including a trend.

When this occurs, a price reversal happens, and if you‘re unable in order to make the distinction between a price pullback and also a price reversal, it may cost you dearly.

Price reversals could be brutal and sudden because when an existing mature trend is set up, it may catch complacent traders off guard, as when they are hit using a sucker punch.

The rationale is any trend, regardless of how strong or how long it really has been set up, can outrun its underlying fundamentals or evolving technical criteria. As a rubber band which has been stretched to its limit, at some point It‘ll snap back quickly inside the opposite direction.

Trend traders must keep this on your mind. Inside a fast-moving market, not understanding each time a price reversal will appear is similar to playing Russian roulette. Even should you get lucky five times, once the hammer falls you‘re finished.

Trend physics

Newton’s First Law of Physics details that,


However, the hard truth of trend trading is at some point it ends. Worse, during its move it may result in complacency upon the section of the trader because it may lull you into believing that It‘ll continue on its current path forever. The trader simply overlooks the consideration the trend could end suddenly and abruptly.

Herds of traders become victim to price reversals just by the inability to learn warning signs and produce adjustments because They‘re Not reading price accurately. This insufficient skill can cause unnecessary losses, but, greater than that, it may cause missing opportunities in case a new trend begins to materialize.