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Reversal on Forex - how to understand that the market turns around
To open a position in the trend and almost immediately turn out to be against the trends - have You ever had? It is not always clear when the market will unfold, and the first signs of such changes often pass us by unnoticed. Today we will see how we can predict the reversal in Forex.
To start, here are the main groups of search options points change trends: indicators, patterns, and other observations. As for the indicators, yet their effectiveness is ambiguous, as will be discussed below.
I would like to note several indicators that are in the standard set of MetaTrader 4, which can help in finding the moment of change of the trend direction:
1. Moving Average
3. Heiken Ashi
Any indicators that can be used to find market turning points, have one serious drawback. We are talking about the fact that changing the parameters, we can sooner or later learn about the transition time correction into a full-scale reversal.
If the settings of the indicators will be very sensitive, the Forex market turn we will see, if not at each adjustment. If "zagrabiti settings, a lot of false signals will disappear, but we will later receive information when the price has passed a long distance on the chart. To find the "Golden mean" in the circumstances.
Search of reversals on Forex with the help of patterns
Pattern in the foreign exchange market are called the same type of market situation, which is solved usually the same way. First, it's just an observation, when a person says something, for example, a graphical figure, which leads to the same situation in most cases. Then, the person trying to describe the shape mathematically, and introduces some terms that will distinguish this building from any other market situations.
Such rules, we can say, describe the form of the figure, noting all the basic features, which further help a person to identify this pattern on the chart.
The above illustration shows an example of one of the most popular patterns in Forex, which is called the "Triangle". As soon as a trader sees on his chart like pattern, he immediately prepared for the fact that the market price, when going beyond the figures will quickly go in the direction of breakdown.
Of course, the triangle is not a reversal pattern in Forex but it is easy to understand that such pattern in the currency market.
After one finishes with the formulation of his observation, he checks it in action, gathering the statistics. For example, the trader decides that you should draw conclusions only after making 100 trades on a demo account in the figure. If the results of this test it gets the result that suits him, the man accepts this feature of the market pattern in their trade.
Well-known reversal patterns:
• Head and shoulders
• Double top (double bottom)
About a pattern pin-bar You can read more in this article. Other options for determining the figures of the trend reversal are also available online with a full description.
It was noticed that, for example, when forming the pin bar, the market often reverses, what continues to move in the same direction. This observation, like in any other case, after testing became the rule, which has its own characteristics, description and so on.
Observations which help to find reversals
There are also observations that allow us to speak about a more probable reversal of the market but do not have a clear description. This may be partially a subjective evaluation of the market, the combination of some regulations with the rapid release of important news and so on.
As an example, this observation, which is used by some experienced traders. If the market is moving in trend for a long period of time (determined by duration of the previous trends), with rapid release of important news profiteer is preparing to become against the current market trends.
Such conclusions were made on the assumption that buyers already have driven high price (in the case of an uptrend), and therefore, even if the news will be positive, willing to buy already, most likely, will not. At the same time, if the market deem the news as negative, then be happy a lot of traders will rush to sell their volumes.
In other words, positive news on the instrument is not perceived as readily as negative when the market for a long time growing up. Such reasoning is true for a downtrend, only with the opposite conclusion.
In conclusion, I would like to say that reversal indicators in Forex, as a rule, are late, or will give a lot of false signals. Patterns are presented to the author the most objective and at the same time, timely whistle about changing market trends. Other ways that lack objectivity and are unable with a small error to be proven, just not credible.
|Category: Forex | Added by: (05.11.2017)