Identifying the key reversals in the Forex market

Reversals are a very common phenomenon in the Forex market. Those who are involved in the trading profession for a long time knows how easily the trend reverse. Though we know a trend trading strategy is the most effective way to earn money, we need to be careful about the reversal. To ensure steady cash flow, we need to have some knowledge about the reversal identification process.

There are many ways by which you can identify the key reversals in the market. But today, we are going to give you the most important techniques by which the professional traders determine the reversal point in any trend. Let’s get into the details.

Fibonacci retracement tools

Fibonacci retracement tool is a great way to identify the key reversal points in the market. If you spend some time and learn about the important market details, you will realize the price of a certain asset always move with minor retracement. But if the retracement extends beyond the 61.8% Fibonacci retracement level, we need to consider it as a trend change. But there is a small twist to the use of the Fibonacci retracement tool. To get the best results from this tool, we need to use the Fibonacci retracement tools in the higher time frame only. By using it in a higher time frame, we will get a more accurate reading about the trend.

Reversal chart pattern

Chart pattern trading strategy provides a powerful indication of the major reversal in the market. Many retail traders follow aggressive trading techniques to identify the key reversal point. But if you look at the professional trader, you will notice all of them have strong knowledge about the reversal chart pattern trading strategy. So, learn about the major reversal chart pattern so that you can identify the key reversal point.

For instance, if you spot a head and shoulder chart pattern in the daily chart, you need to wait for the break of the neckline. Once the price break below the neckline, it signifies the end of the bullish trend. But as a chart pattern trader, you should always trade with a professional Forex broker like Saxo. By choosing a reliable broker, you will be able to analyze the market data with the help of advanced tools.

Using the candlestick pattern

Learning about the Japanese candlestick pattern is a great way to improve your trading skills. If you become good at analyzing the critical market data, you can easily improve your trade execution points by identifying the endpoint of the reversal. Some of the advanced traders often trade the major reversal by using the reliable candlestick pattern. Once you master the art of candlestick pattern trading strategy, you will be confident to trade the major reversal. This method is often called a price action trading strategy.

Being a price action trader, try to use the data in a higher time frame. If you use the price action confirmation signal in the lower time frame, it will be hard to manage the risk profile.

Analyze the news

By analyzing the news, you can easily get clear information regarding the reversal in the trend. But for that, you need to rely on the high-impact news. Low and medium-impact news doesn’t have the power to change the trend. But never rely on the fundamental data only. You have to relate the news data with the technical parameters before taking any trade. Once you are certain that the news event is going to alter the trend direction, you can take the trade. But at the initial stage, you should learn about the news trading method by using the demo account.

Conclusion

Professional traders know a lot about the market. Just because you love trend trading strategy doesn’t mean you can’t learn to identify the reversal. Knowing the reversal trading method will trade from the sudden trend change.

TIME BUSINESS NEWS

TBN Editor

Time Business News Editor Team