Is Reversal Trading in Forex for You – or Is Trend Trading the Best Option?
Neither reversal trading nor trend trading is universally “best” in forex. Both can be profitable. The right choice depends on your personality, risk tolerance, and market conditions. Volume price analysis (VPA) works brilliantly for both styles. It provides objective signals through volume confirmation.
In the London forex session, the focus was on reversals and reversal trading, and whether this suits your temperament and personality as a trader. The forex market is one of mean reversion, with currencies moving from oversold to overbought and back again in all timeframes. This presents a myriad of trading opportunities using the currency strength indicator for MT5, NinjaTrader and TradingView. But the question is whether this is for you.
The Advantages Of Reversak Trading
The advantage of reversal trading is as a trader you get in early and so maximize returns on the position. However, getting in early comes at a price, which is the need to have a wider stop loss as it’s not a question of if the market will reverse but when. And in waiting for the reversal to occur, requires patience and risk management as currencies can remain overbought or oversold for longer than you think. So the key is whether this style of trading suits your personality. If it does, that’s great.
The alternative is to wait for any breakaway or breakout and join any trend once underway. Any stop loss can be much tighter as a trend will have momentum, but the rewards are potentially lower also, since entering a trend once underway means some of the move has already occurred. As always in trading, risk and reward go hand in hand. Higher risk for higher returns and lower risk for lower returns. Watch the video and discover whether reversal trading is for you in this live session using volume price analysis and the Quantum Trading tools and indicators.
Check out the trading indicators and currency strength indicator for MT4/5, NinjaTrader and TradingView at https://quantumtrading.com
Reversal Trading: Catching Turns
Reversal trading aims to enter at market extremes. You buy near bottoms or sell near tops. This offers high reward-to-risk if timed right. VPA excels here—look for stopping volume (high volume halting a downmove) or climactic volume (exhaustion at highs/lows).
Pros:
- Potentially larger rewards on correct calls.
- Fewer trades needed for profits.
Cons:
- Higher false signals (traps are common).
- Requires patience and strong psychology.
Reversal trading suits patient, contrarian traders who enjoy hunting turns.
Trend Trading: Riding Momentum
Trend trading follows established moves. You enter after confirmation and ride until signs of weakness. VPA validates trends—rising prices with increasing volume show conviction.
Pros:
- More frequent setups in trending markets.
- Easier emotionally (go with the flow).
Cons:
- Late entries miss early moves.
- Drawdowns during pullbacks.
Trend trading fits disciplined traders who prefer “let winners run.”
Which Is for You?
- Reversal if: You thrive on analysis, tolerate more losses for bigger wins, and use VPA to spot exhaustion (e.g., divergence).
- Trend if: You prefer confirmation, lower stress, and steady compounding.
Many successful traders blend both. Use higher timeframes for trend direction, lower for reversal entries within trends. Quantum indicators (Trend Monitor for trends, Accumulation/Distribution for reversals) on MT5 or NinjaTrader make switching seamless.
Anna Coulling’s VPA methodology supports both—volume reveals truth regardless of style. Test on demo to see what matches your personality. There’s no “best”—only what works for you with discipline. Quantum tools help master either.
Wyckoff Method Basics: A Timeless Approach to Market Analysis
The Wyckoff Method is a foundational technical analysis framework developed by Richard D. Wyckoff in the early 20th century. He studied “smart money” (institutions and professionals) vs “weak hands” (retail traders). The method uses price action, volume, and market structure to identify accumulation, distribution, trends, and reversals. It’s the precursor to modern Volume Price Analysis (VPA).
Wyckoff viewed markets as manipulated by a “Composite Man” (institutions). They accumulate quietly, markup prices, distribute to public, then markdown. Traders align with this for edge.
Wyckoff’s Three Fundamental Laws
These laws explain market behavior:
- Law of Supply and Demand Price rises when demand > supply (bullish). Falls when supply > demand (bearish). Equilibrium creates ranges. Volume confirms—high volume up = demand winning.
- Law of Cause and Effect Every effect (price move) has a cause (prior phase). Accumulation/markup cause = bullish effect. Distribution/markdown = bearish. Larger cause (longer range) = larger effect (stronger trend).
- Law of Effort vs. Result Effort (volume) should match result (price change). High effort, low result = absorption (professionals opposing). Low effort, big result = easy progress (trend strength). Divergence signals change.
The Four Market Phases
Markets cycle through:
- Accumulation: Smart money buys quietly at lows. Price ranges. Volume high at support—buyers absorb selling. Signs: Stopping volume, springs (false breakdowns).
- Markup: Uptrend begins. Price rises on increasing volume. Pullbacks on low volume—buy dips.
- Distribution: Smart money sells at highs. Price ranges or makes marginal highs. Volume high but price stalls—divergence.
- Markdown: Downtrend. Price falls on high volume. Rallies on low volume—short bounces.
Practical Application Basics
- Charts: Use bar or candlestick with volume.
- Tools: Point & Figure for targets. Modern: Quantum VPOC for control levels, Accumulation/Distribution for phases.
- Trading: Buy in accumulation/markup. Sell in distribution/markdown. Avoid tertiary (minor) moves.
VPA (Anna Coulling’s evolution) modernizes Wyckoff—focuses on candle anatomy + volume. Quantum indicators on NinjaTrader visualize Wyckoff phases.
Wyckoff basics reward patience. Align with smart money. Volume confirms intent. Master the laws and phases for timeless edge.
By Anna Coulling