The reversal trading strategy is based on identifying when a current trend is going to change direction.

Once the reversal has happened, the strategy will take on a lot of the characteristics of a trend trading strategy – as it can last for varying amounts of time.

A reversal can occur in both directions, as it is simply a turning point in market sentiment.

A ‘bullish reversal’ indicates that the market is at the bottom of a downtrend and will soon turn into an uptrend.

While a ‘bearish reversal’ indicates that the market is at the top of an uptrend and will likely become a downtrend.