5 Ways To Determine Market Direction

I would be hesitant to try to predict a reversal before it happens. It is better to wait for a reversal to happen and have confirmation that the reversal is legitimate and not a fakeout. Predicting a reversal is the like attempting to catch a falling knife. Confirming a reversal is like picking up a knife off the floor after it is no longer falling.

With all of the warnings out of the way, a change of character (CHoCH) indicates that a reversal may be occurring and a shift of market structure (SMS) is an indication that a reversal may occur in the near future.

What these would look like on a chart

CHoCH:

Bearish SMS:

One last warning: I would qualify a CHoCH based on market structure and I wouldn’t trade based solely on a SMS without additional confirmation.

Since this thread really isn’t about reversals this other thread may be helpful when evaluating a CHoCH: Market Structure - Know Your Change of Character (CHoCH)

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