Reversal Amount

DEFINITION of 'Reversal Amount'

The amount of price movement required to shift a chart to the right. This condition is used on charts that only take into consideration price movement instead of both price and time.

BREAKING DOWN 'Reversal Amount'

In the context of point and figure (P&F) charts, the reversal amount is the number of boxes (an X or an O) required to cause a reversal. A reversal would be represented by a movement to the next column and a change of direction. If you increase the reversal amount, you will remove columns corresponding to less significant trends and make it easier to detect long-term trends. In terms of Kagi charts, it is the amount (generally around 4%) needed to change the direction of the vertical lines.

RELATED TERMS
  1. Count

    A type of technical analysis that uses point and figure charts ...
  2. Point & Figure Chart

    A chart that plots day-to-day price movements without taking ...
  3. Box Size

    The minimum price change that must occur before the next mark ...
  4. Weekly Chart

    A chart where each data point is comprised of the price movement ...
  5. Technical Rally

    An upward movement in a security's price following a declining ...
  6. Reversal

    A change in the direction of a price trend. On a price chart, ...
Related Articles
  1. Trading

    Point And Figure Charting Basics

    Learn how to construct and read these price charts designed to highlight entry and exit points for longer-term positions.
  2. ETFs & Mutual Funds

    A Look At Kagi Charts

    This relatively unknown tool could help you find an asset's trend faster.
  3. Trading

    Testing Point-And-Figure Patterns

    Learn the patterns that will help you pinpoint and profit from breakouts.
  4. Trading

    Tic-Tac-Toeing Your Way To Better Returns

    Point-and-figure charts eliminate the noise surrounding a stock to help you determine where it's headed.
  5. Trading

    Analyzing Chart Patterns

    Learn how to evaluate a stock with a few easy-to-identify patterns.
  6. Trading

    What Your Trading Charts Aren't Telling You

    You may be missing some key statistics when following charts in the market.
  7. Trading

    Analyzing Chart Patterns: Introduction

    By Chad Langager and Casey Murphy, senior analyst of ChartAdvisor.com Ever looked at the chart of a stock or commodity? Most likely, you have. Just about everyone who has ever analyzed a security ...
  8. Trading

    Retracement Or Reversal: Know The Difference

    Learn to distinguish between a temporary price change and a long-term trend.
  9. Trading

    Trading Without Noise

    False signals can drown out underlying trends. Find out how to tone them down and tune them out.
  10. Trading

    Analyzing Chart Patterns: Why Charts?

    By Chad Langager and Casey Murphy, senior analyst of ChartAdvisor.com Before the advent of computers and data feeds, the use of charts to formulate trading strategies was outside the mainstream ...
RELATED FAQS
  1. Point and Figure Charting Using Count Analysis

    See how traders use count analysis on point and figure charts, and learn why this method differs from more traditional types ... Read Answer >>
  2. Why is the Ease Of Movement Indicator important for traders and analysts?

    Read more about the ease of movement indicator, a technical momentum oscillator created by Richard Arms to track price changes ... Read Answer >>
  3. What types of data are necessary to make a technical analysis?

    Understand what technical analysis is, the basic theory behind employing it and what data inputs are needed to conduct it. Read Answer >>
  4. What is the Ease Of Movement Indicator formula and how is it calculated?

    Read about and learn how to calculate the Ease of Movement indicator, created by Richard W. Arms Jr., to help measure the ... Read Answer >>
  5. What is a common strategy traders implement when using the Ease Of Movement Indicator?

    Read about some common strategies that traders can implement to make the most of out the ease of movement indicator developed ... Read Answer >>
  6. How do I use the Ease Of Movement Indicator to create a forex trading strategy?

    Discover how forex traders can apply the ease of movement indicator with currency pairs to and highlight how sensitive price ... Read Answer >>
Hot Definitions
  1. Glass-Steagall Act

    An act the U.S. Congress passed in 1933 as the Banking Act, which prohibited commercial banks from participating in the investment ...
  2. Quantitative Trading

    Trading strategies based on quantitative analysis which rely on mathematical computations and number crunching to identify ...
  3. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  4. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  5. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  6. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
Trading Center