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.

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