In contrast to trend-following methods, reversals involve identifying a market's regular top or bottom. Technical indicators are frequently used to buy, sell, and trade reversals in order to identify potential market entry points. Some examples include stochastics, candlestick patterns, and moving average crossings. When a currency pair becomes "overbought" or "oversold," a reverse trade is executed. To do so, sell against a bullish trend and buy against a bearish one. Reversal strategies are frequently advocated in Forex buy and sell recommendations, but it's important to remember that they can be riskier and more difficult to implement.

In forex, a reversal refers to a change in the direction of a currency pair’s price trend. When a currency has been moving in one direction, either up or down, a reversal signals the beginning of a new movement in the opposite direction. Traders look for reversals to identify potential entry and exit points, as they often present opportunities for profit.

Reversals can occur due to various factors such as economic news, market sentiment shifts, or technical signals like overbought or oversold conditions. It's crucial to distinguish between reversals and retracements (temporary pullbacks), as the latter don't indicate a full trend change. Tools like moving averages, trendlines, and momentum indicators help traders confirm potential reversals for better decision-making.