Going from up to down takes time — it’s a process, not an event. The transition from an up trend to a down trend doesn’t happen like this –
It happens like this –
Transitioning from a down trend to an up trend, not like this –
But like this –
Here’s a trading tip that you can prove to yourself regarding trend reversals. After a long up trend the first sharp decline will always find traders willing to buy. Conversely, after a protracted down trend the first snap up will find traders that will sell.
Take another lo0k at the two stock charts above and think about the contents of the last paragraph.
If you can accurately detect trend reversals there is money to be made trading them.
Here’s another trading tip that you may want to add to your trading method. After an uptrend don’t short the first decline — short the second high. After a long down trend, don’t buy the first move up, but buy the second.
Reversals take time and sometimes build at an excruciatingly slow pace. The process can lull traders into a mental haze. Take your time, keep your data current with fresh trend lines every night and you’ll spot and profit from trend reversals.
