Virtually all major trend reversals begin with either a trend line break or a trend channel line overshoot and reversal, and all of those eventually break the trend line when there is a reversal. Four things are needed for a major trend reversal: a trend on the chart a countertrend move (a reversal) that is strong enough to break the trend line and usually the moving average a test of the trend's extreme, and then a second reversal and the second reversal going far enough for there to be a consensus that the trend has reversed. The earliest signals for most major trend reversals have a low probability of success, but offer the largest reward, often many times greater than the risk. This type of reversal is different from the many up and down reversals on the chart that usually move far enough for a trade, but not far enough to change the direction of the major trend. A major trend reversal means that there are two trends on the chart, with a reversal in between them where either a bull trend has reversed into a bear trend or a bear trend has reversed into a bull trend. The term “major trend reversal” means different things to different traders, and no one can say with certainty that the trend has reversed until the move has gone on for at least enough bars for the always-in position to change direction in the eyes of most traders.
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