Bridal Gowns

When day trading, the reversal comes when just as its name suggests, the trend of the stock is changing or reversing to run in the opposite direction, or a change in trend. The best place to look to enter a position is after the close of the reversal candle, which is closed above the previous high or below the previous low. It is important to verify the stock has the volume behind it to push that reversal in its intended direction. Without the volume, the change in direction may fail; this is called a head fake.

So watching for volume increase is key; otherwise, it probably will not continue in the expected direction. Also, look for the stochastics to be oversold or overbought depending on the direction of the reversal. This applies to both short term and longer term stock chart time frames. After entering the stock trade, you will want to place your stop loss just below the low of the day if you went long or just above the high of the day if you are shorting the stock.

Remember not to use round numbers when placing a stop; instead increase your stop or decrease it by a few cents to prevent being stopped out needlessly.