What is a 5-bar Reversal Indicator
Introduction
Undoubtedly, trend reversals are the most awaited moments in trading. Every time a trend reversal arrives in trading, it makes a huge profit for traders who spotted it coming in advance. However, it is a challenging task to spot a trend reversal. It can cause you a significant loss if you make a wrong guess. So it is extremely necessary to keep in mind every big and small point before making a trade for a trend reversal.
The 5-bar reversal indicator is one of the most trusted indicators for a trend reversal. If you successfully spot a 5-bar reversal indicator, it can make you a good profit. So let's have a look at the 5-bar reversal indicator in detail.
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What is a 5-bar reversal indicator?
As its name refers, a five-bar reversal indicator includes the determination of 5 candlesticks in a row to spot a reversal in the current trend. Moreover, it is a short-term technical indicator with either five bullish candlesticks or five bearish candlesticks consecutively. Even when it is a trustful indicator, it is still never recommended to follow the indicator without any market research. However, you should know how to spot this indicator as it will absolutely help you in your trading journey.
How to make a trade based on a 5-bar reversal indicator?
Now let's understand the trade pattern that you should follow while making a trade based on this indicator.
- The first step is to spot a 5-bar reversal indicator, which is easy. You have to spot 5 bearish or bullish candlesticks in a row.
- For making a trade, you should first see if the 6th consecutive candlestick is created in the opposite direction. For example, if the five candlesticks were bearing, the sixth one should be bullish and vice versa.
- Now, if this sixth candlestick excels the fifth candlestick, you can enter based on this indicator.
How to conduct market research before trading with the 5-bar reversal indicator?
Along with the 5-bar reversal indicator, you can add good market research to make your trade more risk-proof. You can research historical price data and news about the market. Moreover, tracking the performance of related assets or markets is also good for your market research.
Conclusion
The 5-bar reversal indicator is one of the best technical indicators for trend reversal trade practice. It is comparatively a better indicator than others. However, you should make an early exit to avoid losses and register a good profit. Moreover, good market research can further lower the risk associated with the 5-bar reversal indicator. So, if you also want to make your trading journey risk-proof, open your trading account with Motilal Oswal today.
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