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Monday 30 November 2020

Forex price reversal

 What is a price reversal, when it occurs, can I find out in advance whether there will be a price reversal or not? These questions are often asked by traders who are just starting to work in the financial markets.

In this article, we will try to deal with this issue. As you know, Forex is a huge financial market with millions of buyers and sellers. And just like in any other market, one of the fundamental factors that affect the price of a product is supply and demand. If there are more buyers, the price of the product increases; if there are fewer, the price falls accordingly.

So how should a trader understand that the market is turning ?This is one of the most important questions for any trader, there are a huge number of theories and many books written on this topic, and it is difficult to give a short, unambiguous answer Yes, and in principle — impossible. Otherwise, all traders would have the same profitable trades.However, not everything is so bad, and traders have learned to recognize and identify the moments when the price reverses. One of the most common and simplest methods is technical analysis. As you know, from the rules of trading on the Forex market, the price will continue its movement rather than turn around. The price reversal must be confirmed by certain signals. These signals can be divided into several groups:

A bounce or a break out of technical levels.

Forex price reversalEverything is simple here. There are so-called strong technical levels, reaching which the price was most "delayed" in previous periods, and which it could not break through-it returned back. The price moves between these levels and there is a high probability that the price will rebound from them. In the event of a breakdown of the technical level, we can observe a price reversal.

Breakdown of trend lines.

In the Forex market, the price moves in waves. By connecting each subsequent high or low of the price movement, we can determine the direction of the trend. At a certain time, the price breaks the border of this trend. When the price breaks through the support line in an uptrend and the resistance line in a downtrend, a price reversal is quite possible.

Graphic shapes.

Forex price reversal 1With a high probability, we can get a signal for a trend reversal using certain price configurations — so-called figures, such as" head — shoulders"," double top","triangle".

Candlestick pattern

Also, signals for a market reversal can show certain combinations of candles, bars, such as" doji"," hammer"," morning star " and others.Thus, using these methods of determining the price reversal in trading, traders will always be able to find the entry point to the transaction and make a profit.