Adjustable Correction from ATH Signal

19 Sep

A "Correction Signal from All-Time High" is an indicator used to identify potential reversals or pullbacks in an asset's price after it has reached its highest historical level, known as an all-time high (ATH). This signal typically occurs when the price begins to decline after hitting the ATH, suggesting a correction phase where the asset retraces part of its upward movement.

Key elements of this signal include:

Overbought Conditions: The asset may have experienced a strong rally leading to an overbought condition, where the price could be considered too high relative to recent trends.

Reversal Patterns: The correction signal is often accompanied by technical patterns or indicators that suggest a reversal, such as bearish candlestick formations, negative divergence in momentum indicators, or moving average crossovers.

Percentage Decline: A correction is generally defined as a price drop of at least 10% from the ATH, although smaller pullbacks may also signal potential market shifts.

Volume Analysis: Increased selling volume after the ATH can validate the correction signal, indicating that more market participants are taking profits or exiting positions.

This signal helps traders and investors anticipate periods of market consolidation or potential downturns after significant price advances, allowing for better risk management or entry points for new positions.