Reversal

Posted in Finance, Accounting and Economics Terms, Total Reads: 512
Advertisements

Definition: Reversal

Reversal may be stated as a change in the direction of a trend in prices. On a chart of prices, reversals undergo a sizable change in the structure of prices. An uptrend, which can be said to be a series of higher maxima and higher minima, reverses into a downtrend by shifting to a series of lower maxima and lower minima. A downtrend, which is a series of lower maxima and lower minima, reverses into an uptrend by changing to a series of higher maxima and higher minima. It may also be referred to as a ‘trend reversal’, ‘rally’ as in market rally or ‘correction’.

 

A reversal may be a positive or negative transformation against the prevailing trend. Trading analysts look out for these patterns because they would be able to show the requirement for a different trading plan on the same stocks.


For example, if a trading analyst holds stock A and observes a reversal pattern, he or she may want to think about closing his or her current long position and if in a short position to make the most out of the potential downward movement of the share's price.

 

Hence, this concludes the definition of Reversal along with its overview.

Advertisements

Browse the definition and meaning of more terms similar to Reversal. The Management Dictionary covers over 7000 business concepts from 6 categories.

Search & Explore : Management Dictionary



Share this Page on: