Confirmation Signals

Confirmation signals are technical or fundamental indicators that provide evidence to support a trading thesis or a predicted market movement. In the context of a trend reversal, traders look for confirmation before committing significant capital.

This might include a break of a key trendline, a volume surge in the direction of the new trend, or a change in a key macroeconomic variable. Relying on confirmation helps reduce the risk of false signals or "whipsaws." However, waiting for confirmation can also mean missing the initial part of a move.

A disciplined trader balances the need for confirmation with the requirement for timely execution, often using a tiered approach to position sizing.