They say, “the trend is your friend”—until it bends at the end. Every strong move eventually runs out of steam, but spotting the turn and trading it effectively is no easy task. Some traders try to anticipate the reversal, positioning ahead of time, while others wait for confirmation, entering once the trend has already shifted. Both methods have their strengths and weaknesses, and the best approach depends on your risk tolerance and trading style.
Anticipating the Turn: Catching the Reversal Early
This approach focuses on momentum shifts and false breakouts before the price fully confirms a new trend. The goal is to enter before the crowd, capturing a reversal at the best possible price.
Key Tools:
Momentum Divergence – If price makes a new high or low, but RSI fails to follow, it suggests the trend is weakening.
False Breakouts – If price breaks a key level but immediately reverses, it signals a trap set for traders expecting continuation.
Benefits:
• Better risk-reward – Entering before the confirmation means stops can be tighter, allowing for a larger potential profit.
• First-mover advantage – Catching a trend change early means getting in at a great price before the majority of traders react.
Drawbacks:
• Higher failure rate – Many trends look weak before resuming, leading to premature entries and false starts.
• Requires precision – Entry and stop placement must be exact to avoid being caught in noise.
Waiting for Confirmation: Trading the Break
Rather than trying to predict the turn, this method waits for price to confirm the reversal by breaking key levels or forming a clear new trend structure.
Key Tools:
Trend Structure Shift – A series of lower highs in an uptrend, or higher lows in a downtrend, signals exhaustion.
Break of Key Support/Resistance – Once price decisively moves beyond a critical level, it confirms the trend change.
Benefits:
• Higher probability trades – Waiting for confirmation reduces the risk of being faked out by temporary pullbacks.
• Less stressful – Entering after the break avoids the uncertainty of catching tops and bottoms.
Drawbacks:
• Worse risk-reward – Entry is later, meaning stops tend to be wider and potential profits smaller.
• Missed moves – Sometimes, a reversal happens too quickly, leaving conservative traders behind.
Applying Both Methods: Two Live Market Examples
1. EUR/USD – A Potential Trend Reversal in Progress
Recently, EUR/USD had been stuck in a long-term downtrend, with lower lows forming consistently. But the latest attempt to break support failed spectacularly.
Anticipatory Approach: Traders watching for a false breakout could have entered after price dipped below support and immediately reversed. RSI also showed bullish divergence—momentum was no longer confirming the downtrend. Entry would be placed just above the reclaimed support, with a tight stop below the false breakdown.
Momentum-Based Approach: Traders waiting for confirmation would have looked for a strong breakout above the first major resistance. After the false breakdown, price surged above prior swing highs, confirming buyers had taken control. The break of horizontal resistance provided a clearer entry signal, with stops below the breakout level.
EUR/USD Daily Candle Chart
Past performance is not a reliable indicator of future results
2. S&P 500 – The Start of a Breakdown?
The S&P 500 had been in a strong uptrend, but multiple failed attempts to break through resistance suggested buyers were losing momentum. Eventually, price broke below key support, triggering a sharp decline.
Anticipatory Approach: Traders looking for early signs of weakness could have entered short after noticing a series of failed breakouts. RSI divergence signalled that momentum was waning, and the repeated failures at resistance suggested a sell-off was brewing. The entry would have been placed near resistance, with stops just above the recent highs.
Momentum-Based Approach: A more patient trader would have waited for a confirmed break of support. Once the S&P sliced through a major level, a short trade could be initiated on the retest of the broken support, with stops just above the previous swing low.
S&P Daily Candle Chart
Past performance is not a reliable indicator of future results
Final Thoughts: Choosing the Right Approach
Both methods have their advantages. Anticipating reversals can offer an early entry with strong risk-reward potential, but it also comes with a higher chance of false signals. Waiting for confirmation provides greater clarity and reduces the likelihood of premature entries, though it often means entering later in the move.
Neither approach is inherently better—it depends on your trading style, risk tolerance, and strategy. The key is consistency: whichever method you use, having a clear plan and following it with discipline is what separates successful traders from those who get caught on the wrong side of a trend change.
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 83% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
Anticipating the Turn: Catching the Reversal Early
This approach focuses on momentum shifts and false breakouts before the price fully confirms a new trend. The goal is to enter before the crowd, capturing a reversal at the best possible price.
Key Tools:
Momentum Divergence – If price makes a new high or low, but RSI fails to follow, it suggests the trend is weakening.
False Breakouts – If price breaks a key level but immediately reverses, it signals a trap set for traders expecting continuation.
Benefits:
• Better risk-reward – Entering before the confirmation means stops can be tighter, allowing for a larger potential profit.
• First-mover advantage – Catching a trend change early means getting in at a great price before the majority of traders react.
Drawbacks:
• Higher failure rate – Many trends look weak before resuming, leading to premature entries and false starts.
• Requires precision – Entry and stop placement must be exact to avoid being caught in noise.
Waiting for Confirmation: Trading the Break
Rather than trying to predict the turn, this method waits for price to confirm the reversal by breaking key levels or forming a clear new trend structure.
Key Tools:
Trend Structure Shift – A series of lower highs in an uptrend, or higher lows in a downtrend, signals exhaustion.
Break of Key Support/Resistance – Once price decisively moves beyond a critical level, it confirms the trend change.
Benefits:
• Higher probability trades – Waiting for confirmation reduces the risk of being faked out by temporary pullbacks.
• Less stressful – Entering after the break avoids the uncertainty of catching tops and bottoms.
Drawbacks:
• Worse risk-reward – Entry is later, meaning stops tend to be wider and potential profits smaller.
• Missed moves – Sometimes, a reversal happens too quickly, leaving conservative traders behind.
Applying Both Methods: Two Live Market Examples
1. EUR/USD – A Potential Trend Reversal in Progress
Recently, EUR/USD had been stuck in a long-term downtrend, with lower lows forming consistently. But the latest attempt to break support failed spectacularly.
Anticipatory Approach: Traders watching for a false breakout could have entered after price dipped below support and immediately reversed. RSI also showed bullish divergence—momentum was no longer confirming the downtrend. Entry would be placed just above the reclaimed support, with a tight stop below the false breakdown.
Momentum-Based Approach: Traders waiting for confirmation would have looked for a strong breakout above the first major resistance. After the false breakdown, price surged above prior swing highs, confirming buyers had taken control. The break of horizontal resistance provided a clearer entry signal, with stops below the breakout level.
EUR/USD Daily Candle Chart
Past performance is not a reliable indicator of future results
2. S&P 500 – The Start of a Breakdown?
The S&P 500 had been in a strong uptrend, but multiple failed attempts to break through resistance suggested buyers were losing momentum. Eventually, price broke below key support, triggering a sharp decline.
Anticipatory Approach: Traders looking for early signs of weakness could have entered short after noticing a series of failed breakouts. RSI divergence signalled that momentum was waning, and the repeated failures at resistance suggested a sell-off was brewing. The entry would have been placed near resistance, with stops just above the recent highs.
Momentum-Based Approach: A more patient trader would have waited for a confirmed break of support. Once the S&P sliced through a major level, a short trade could be initiated on the retest of the broken support, with stops just above the previous swing low.
S&P Daily Candle Chart
Past performance is not a reliable indicator of future results
Final Thoughts: Choosing the Right Approach
Both methods have their advantages. Anticipating reversals can offer an early entry with strong risk-reward potential, but it also comes with a higher chance of false signals. Waiting for confirmation provides greater clarity and reduces the likelihood of premature entries, though it often means entering later in the move.
Neither approach is inherently better—it depends on your trading style, risk tolerance, and strategy. The key is consistency: whichever method you use, having a clear plan and following it with discipline is what separates successful traders from those who get caught on the wrong side of a trend change.
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 83% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.