How to Trade a Down trend Reversal

How to Trade Downward Trend Reversal: How to Identify a Downwards Trend Reversal Signal

Down trend Gold Reversal

When price breaks-out above the downwards trend-line (resistance) trading price then will move up

What Happens when Downwards Trendline is Broken?

How to Trade Downward Trend Reversal: How to Identify a Downwards Trend Reversal Signal

Down Trendline Break

After price has moved in a down trend direction for an extended time period within a down trend it reaches a point where it stops moving within the downward trend. When this occurs we say that the down trend-line has been broken & is interpreted and analyzed as a down trend reversal.

Since the downward trendline is the point of resistance & this point of resistance has been broken after a trendline break - we then expect the price to move towards the in the opposite trend market trend market trend market trend market trend direction upwards and is interpreted and analyzed as a down trend reversal.

When this happens traders will close-out the open gold sell orders that they had sold. This is referred to as profit taking.

This down trend reversal signal is considered to be confirmed with the formation of higher low. This down trend reversal trade setup also provides a trading opportunity to open a buy trade position once the down trend-line is broken - down trend-line reversal trading signal.

NB: Sometimes when the price breaks its down trend it might first of all consolidate before moving in the in the opposite trend market trend market trend market trend market trend market trend market trend direction. Either way it's always good to tp order when the price trend reverses.

To trade this down trend reversal setup as a trader once you open a new trade in the direction of the trend reversal the price should immediately head up in that particular direction, in a price break out manner. This means the prices should immediately head upwards in that direction of the reversal setup without much resistance.

If on the other hand the prices do not immediately head in the upwards direction of the price breakout then it is best to close out the buy trade because it means the down trend is still holding.

Another tip is to wait for the downwards trend-line to be broken & for the market to close above it so that to confirm this down trend reversal.

What happens is that most traders open trade positions waiting for a trading reversal even before the down trend is broken, only for the price to touch this downwards trend-line and for the current market down trend direction to hold and gold to continue with the current market down trend.

Hence, when trading this down trend reversal setup it is best to wait until the price break out has been confirmed by price closing above the trend line.

Downward Price Trend Direction Reversal - this down trend reversal is confirmed once the price closes above the downward trendline, this should be the right time to open a buy trade, so as to avoid a trade fake out.

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