Properly distinguishing between retracements and reversals can reduce the number of losing trades and even set you up with some winning trades. Classifying a price movement as a retracement or a reversal is very important. There are several key differences in distinguishing a temporary price change retracement from a long-term trend reversal.
A popular way to identify retracements is to use Fibonacci levels. For the most part, price retracements hang around the If price goes beyond these levels, it may signal that a reversal is happening. In this case, price took a breather and rested at the Another way to see if price is staging a reversal is to use pivot points.
If broken, a reversal could be in the making! The last method is to use trend lines. When a major trend line is broken, a reversal may be in effect. By using this technical tool in conjunction with candlestick chart patterns discussed earlier, a forex trader may be able to get a high probability of a reversal. At the end of the day, nothing can substitute for practice and experience. With enough screen time, you can find a method that suits your forex trading personality in identifying retracements and reversals.
We don't stop playing because we grow old, we grow old because we stop playing. Partner Center Find a Broker. Fundamentals DO change, which is usually the catalyst for the long-term reversal. In an uptrend , buying interest is present, making it likely for price to rally. In a downtrend , selling interest is present, making it likely for price to decline. In an uptrend , there is very little buying interest forcing the price to fall lower. In a downtrend , there is very little selling interest forcing the price to rise further.More...