You can identify a retracements using a basic tool of trend lines. Retracements can be caused by changes in money flow, for example change in the buying interest of market participants during a decline or an uprise, market indecisiveness, change in trading volume when retail traders take profits in small block trades and so on they usually coincide with вЂindecisionвЂ™ candles on a price chart. These changes are temporary and do not mean that the main larger trend will be reversed. What is a retracement?ДЄ retracement or a trend вЂpullbackвЂ™ is a short-term reversal in the direction of a price that takes place within a general long-term trend. Ignoring a trend reversal may lead to excessive risk taking and unexpected losses in your trading process. As a day trader you might consider daily price reversals, but if you are trading over longer time horizons you may choose to focus on price reversals over weeks, months or even quarters: time period of a reversal depends on its relevance to your trading time frame. Once the price chart breaks from downward and moves upwards again, there is a signal of an upward reversal. The price makes small upward pullbacks but the overall trend continues downwards, indicating a point of a downward trend reversal. However, as some point the price drops below the moving average trend line with a lower low price level. The chart above shows the stock moving into an upward direction with higher highs and higher low price levels over a relatively long time period. For example, when the price falls below the MA line there is a potential for a downward price reversal, like on the image below, and vice verse for an upward reversal. Usually tools like trend lines and moving average indicators are useful in spotting price reversal points. How to identify a reversal?Д®Toro offers several instruments that may help you to identify a trend reversal. A reversal in a price trend creates higher highs or lower lows within the time frame. Reversals can happen for many reasons, for example major change in market fundamentals, large volume institutional sale or purchase or any other major market change reversals are typically accompanied by вЂreversalвЂ™ candles. A reversal happens when the price of an asset changes direction of movements and continues in that direction for a relatively long period of time.

Day trading reversals