Price Reversal
A price reversal occurs when the direction of an asset's price trend changes, shifting from bullish to bearish or vice versa. These points are critical for traders as they mark the end of one trend and the beginning of another.
Reversals are often preceded by specific technical patterns, such as double tops or head-and-shoulders, or by exhaustion in buying or selling pressure. In cryptocurrency, reversals can happen rapidly due to the high sensitivity to news and liquidity shifts.
Algorithmic strategies use indicators like RSI or MACD to detect early signs of a reversal. Identifying these points allows traders to enter positions at the start of a new trend or exit before a major move against them.
Understanding the factors that lead to reversals is key to mastering market timing and managing trade risk effectively.