Reversal Trading

What Is Reversal Trading? Reversal trading is a strategy where traders identify trend changes, aiming to enter trades before or during a market shift from bullish to bearish or vice versa. It relies on chart patterns (e.g., head & shoulders, double tops/bottoms), candlestick signals (e.g., engulfing, pin bars), and indicators (e.g., RSI divergence, moving averages). Why Is It Used? Traders use reversal trading to capitalize on major trend shifts, maximize profits early in a new trend, and avoid entering late in a trend. It’s essential for high-reward setups with tight risk management.