When talking about the highs and lows earlier, I mentioned a question: after prices make a new high and then fall again—was that just an ordinary pullback, or has the original trend already started to change?
In many cases, this distinction can’t be determined by just one big bearish candle or one day’s price movement. When a trend truly changes, it usually first shows problems in the existing high-low structure.
In this episode, we continue—how exactly do you spot a trend reversal?
1. First, make it clear: a pullback is not the same as a reversal
Let’s assume BTC is in an uptrend:
Higher highs keep being formed, and the lows also keep getting higher.
It’s normal to see a decline after the price has risen for a while.
As long as during the pullback, the important lows are not clearly broken and then the price can rise again, the original uptrend structure still remains.
So you can’t just say:
“The trend has reversed.”
Trend and short-term fluctuations are two different levels.
II. Where does the signal of a change in the trend usually start to appear?
Let’s go back to the previous period’s highs and lows.
Assuming the original was an uptrend structure:
Higher highs → higher lows → higher highs.
But afterward, when the price drops back, the first time it breaks the previous important low.
At this point, you need to start paying attention.
Because the original structure of “lows constantly rising” has been broken.
However, breaking the low doesn’t mean a full reversal has happened 100%.
Next, you still need to keep watching the price’s bounce.
III. What’s truly key is the bounce that comes next
After the price breaks the previous important low, if it quickly rallies back and again breaks above the previous high, then the original uptrend structure may only have been temporarily disturbed. But if, after the bounce, the price can no longer break the prior highs—instead forming a lower high—and then keeps falling—
At this point, the structure starts to change noticeably.
Originally:
The highs keep getting higher.
The lows keep getting higher.
It may gradually turn into:
The highs start to fall.
The lows also start to get lower.
This is the process that’s more worth paying attention to when an uptrend gradually turns into a downtrend.
IV. Use a simple structure to see it
Originally, an uptrend:
① Higher highs
② The pullback forms a higher low
③ Breaks above the previous high again
This is how an uptrend structure keeps continuing.
If you start to see:
① Breaks the previous important low
② The bounce can’t break the previous high
③ Forms a lower high
④ Breaks below the new low again
So the original uptrend structure has already been gradually changed.
Note that here it means “gradually.”
A trend reversal usually isn’t the market sending you a notification in advance that says:
“Starting now, it’s going down.”
More often than not, it’s the price’s structure changing little by little.
V. How can volume be viewed?
As mentioned earlier, volume can also serve as an auxiliary here.
For example, in an uptrend, when the price breaks a key low and you see a clear increase in volume, it indicates that trading and competition at that level are intensifying.
After that, if the bounce becomes weaker and the volume doesn’t clearly keep up, then you need to pay even more attention to whether the trend is turning weaker.
But volume alone cannot determine a trend reversal.
Still, you need to go back to the price itself:
Has the key level been broken?
After the bounce, does the price regain strength?
Has the structure of highs and lows changed?
These are the real core.
VI. So how should you think about judging a trend reversal?
Don’t conclude the trend has ended just because of one big bearish candle.
And don’t assume the market will definitely keep rising just because the price makes a new high.
First, pull the structure out and look at it:
① What was the original trend?
② Which highs and lows are most important?
③ Has the key low been broken?
④ After a breakdown, how strong is the subsequent bounce?
⑤ Has there begun to be an opposite change in highs and lows?
If you go through these questions in order, a trend reversal won’t just feel vague.
The support, resistance, breakout, fake breakout, volume, pullback, correction, highs, and lows discussed earlier—by this period, they have essentially gradually formed a single coherent logic.
When looking at the trend, it’s not about whether it went up or down on a single day—it’s whether the price’s original movement structure has been changed step by step.
In the next lesson, we can continue with something more practical: how to draw trend lines? Why do many people draw a bunch of lines, and in the end they end up confusing the candlesticks?