In the financial markets, reversals are unavoidable. Prices will always reverse at some point, and there will be multiple up and down reversals over time. Ignoring reversals may require you to take on more risk than you anticipated. When a reversal begins, it is difficult to tell whether it is a reversal or a pullback. When it is clear that a reversal is occurring, the price may have already moved a significant distance, resulting in a significant loss or profit erosion for the trader.
The Reversal strategy’s main principle is to buy in the direction of the price. It is ideal for binary options because transactions can be completed on shorter timeframes and with more frequent signals.
The strategy is based on three powerful indicators: Bollinger Bands, MACD, and the Simple Moving Average (SMA). All of these tools can be found in the Pocket Option terminal.
How do I configure the chart and indicators?
- Activate a candlestick chart and trade highly volatile assets such as USD or cryptocurrencies to use the Reversal trading strategy.
- In terms of indicator settings, for MACD, use the default parameters; for Bollinger Bands, use period 22 and deviation 2; and for SMA, use period 10.
- The reversal strategy should be implemented within 15 minutes, according to experts. You can begin with it and then change it later.
How does the Reversal trading strategy work?
First and foremost, you should wait for a significant price movement: all candles will be the same colour. Wait for 4-5 of these candles to form. Of course, you’re wondering two things: will the trend continue, and when can you buy an option?
Following price rollbacks, trading occurs in patches. To see it on the chart, change the timeframe from 15 minutes to 5 minutes. False signals are also a fact of life. A reversal may occur as a result of an indicator or price action, but the price immediately resumes moving in the previous trending direction.
How to Implement the Reversal Trading Strategy in Quotex
Set up your trading terminal first, and then wait for the 15-minute timeframe impulse movement. When several candles appear on the chart, change to a lower timeframe (5 minutes).
CALL when the candles rise above the Bollinger Bands. The price rose after rebounding from MA (10) in an upward direction. The MACD indicator is above zero.
PUT when the candles are moving downward and are below the Bollinger Bands. The price fell after bouncing off MA (10) in a downward direction. The MACD chart has a reading that is less than zero.
A trend change in the price of an asset is referred to as a reversal. A pullback is a reversal within a trend, but it does not reverse the trend. Higher swing highs and lower swing lows indicate an uptrend. Higher lows are created by pullbacks. As a result, an uptrend reversal does not occur until the price makes a lower low on the time frame the trader is watching. Potential pullbacks are always the starting point for reversals. It is unknown which one it will eventually turn out to be when it begins. Traders try to exit positions that are aligned with the trend prior to a reversal, or they exit once the reversal is underway.
The Quotex provides traders with a comprehensive set of tools for developing a successful trading strategy.
