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Trends & Market Structure

What Is a Trend Reversal

A trend reversal is the place where a trend one way ends and a trend the other way begins: the last lower low, then a higher high, a higher low and a close above the last high, or the mirror of that. This paper shows you the euro's turn of January 2025 drawn from its turning points, the idea as a U-turn in a road, the four candles of the turn on the daily chart, the whole reversal on the weekly chart, and how to step through it a day at a time with F12 on your platform.

Difficulty
Beginner
Reading time
5 min
Pages
8
Reviewed by
Saman Rahbar

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A fall, a turn, a rise

A trend reversal is the place where a trend one way ends and a trend the other way begins. The euro against the dollar fell from 1.12136 on 25 September 2024 to 1.01771 on 13 January 2025 — sixteen weeks and 1,037 pips, a pip being the fourth decimal place, the smallest step most people count in. Then it rose, to 1.18295 on 1 July: twenty-four weeks and 1,652 pips. The January turn is the reversal. Before it, lower highs and lower lows; after it, higher highs and higher lows.

A U-turn

The picture is a U-turn. The road comes in from one direction, bends, and goes out the other way. A reversal is the bend: not the road before it, which was the old trend, and not the road after it, which is the new one, but the place where one becomes the other. The name is given once the road has plainly turned. Inside the bend, while it is happening, it looks like any other curve in the road.

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