4. Reversal Signals—Spotting the Turning Point

Reversals are the types of signals that traders look for most often. They come in many forms and the key to acting on them consists of three parts: recognition, proximity, and confirmation.

Not all reversals are equal. Chapter 3, “Candlestick Patterns—Recognizing Evolving Strength or Weakness,” documented the extensive study by Bulkowski that identified the frequency of successful reversal for specific signals. The high level of confidence in the ten selected signals is a primary reason for picking these, and for focusing on them in this book. The same is true for the selected Western technical signals in Chapter 2, “Traditional Analysis—The Power of Pattern Recognition.” In both cases (Eastern signals ...

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