In the cryptocurrency market, a common question arises: is the price movement we see a trend reversal or just a short-term correction within the current trend? The correct interpretation of this question is crucial for the trading decisions of market participants.
A correction is referred to as a medium-term price movement against the main trend. The goal of a correction is to partially 'reset' the overbought or oversold conditions of the market, after which the main trend continues. Corrections last from several days to 2-3 weeks and do not change the overall direction of the market.
On the other hand, a trend reversal is a long-term phenomenon, where the direction of price movement radically changes to the opposite. If it was rising before, it is now falling. And vice versa. When a trend reversal occurs in the market, it means that the market direction changes for a long time.
To distinguish between a correction and a trend change, analysts use various tools - volumes, volatility, and graphical analysis. The main thing is not to rush to conclusions but to gather enough data to understand whether we are facing a temporary pullback or something more significant.
