How do you estimate advent of reversal ? What tools - Mclellan, fast rsi, candlesticks, etc. etc. Please carry forward this write up explaining how to catch the reversal set up in time, not too late.
I know this is a tall order, and I understand even you can go wrong, but still more important is the process you adopt, for us to imitate.
This is an wise question. I hope I can provide some ideas.
First, price bars. After a sustained uptrend, a DOJI, small bodies, long shadows, large black candle are signs of resistance. This could be a short term pause so price action must confirm by closing below the lows.
Second, leadership. The Index moves up but the leaders fail to make new highs. Banks were the leaders in the previous rally, while IT is the leader in the current, smaller, rally.
Third, trendline break. A minor trendline is broken which indicates at least a short term pause. These pauses will sometimes develop into a bigger decline.
Fourth, resistance. Failure to cross earlier resistance can often be the earliest sign of weakness.
Fifth, follow through on breakout. In a strong trend, a breakout has a strong follow thorugh. Prices remain above the breakout level. If the subsequent days after the breakout see small candles, pullback below the breakout point, then the new up move may not be sustained.
Sixth, breadth. New highs in the Index not confirmed by new highs in advance/declines is a red flag although the actual impact comes late.
Seven, trading ranges. Small, tight ranges begin to break down. The skill here lies in identifying the range. You have to use lines with maximum contact rather than simply connecting the highs or lows.
I hope you get the idea. Not all signs will come. So, the trader has to develop a sense of the market. The basic rule is: assume the trend continues unless proved otherwise.