Reversal Strategy

This is a more advanced strategy based on the concept that if an asset moves in one direction it is unlikely to stay at a peak but return to its original position or close to it. In this case a trader would place a CALL or PUT, depending on which way the asset moves, on a suddenly changing asset price knowing that it will return close to the original price once the peak is reached.

Notice how the overall trend is changeable but it peaked high, dropped to a low peak and returned to a stabilised price again.

The secret to success is identifying when the asset has reached its peak. Knowing why it changed and using fundamental and technical analysis are key to identifying when the asset will peak and return to a stabilised price.