Hey fellows,
This is my 2 cents on trend reversals and corrections. Feel free to share your knowledge
How to identify trend reversals in Forex
Just like determining a direction of a trend, trend reversals in Forex market are always determined and confirmed from a larger timeframe by looking at a bigger picture. Thus, we will only be concerned about weekly, daily, and hourly timeframes.
Identifying trend reversals with SMAs
The most commonly use moving averages are 20, 50, 100, and 200. Generally, two MAs per chart are enough, but depending on a strategy more or fewer could be used.
We need to look at three important aspects when analyzing a security using moving averages. Their crossover, slope, and price position relative to the SMAs.
Identifying trend reversals with MACD
We talked about how, from weekly timeframe, an underlying trend can be determined by the position of MACD bars and confirmed by formation of bars relative to the trailing average. If the signals contradict, lets say bars form at the top but below the moving average, this could be a sign of a correction wave.
Meanwhile, MACD and price action convergence/divergence warns of a possible upcoming shift in trend. Putting everything together, including price action analysis from the paragraph below, we can confirm a shift in trend.
Identifying trend reversals with price action
You might heard this many times, but the simplest way how to determine trend reversals is to spot breaks in formation of higher highs and higher lows in uptrend, and vice-versa in downtrend.
The above is just a draft
You can find the full article with images and explanations here.
This is my 2 cents on trend reversals and corrections. Feel free to share your knowledge
How to identify trend reversals in Forex
Just like determining a direction of a trend, trend reversals in Forex market are always determined and confirmed from a larger timeframe by looking at a bigger picture. Thus, we will only be concerned about weekly, daily, and hourly timeframes.
Identifying trend reversals with SMAs
The most commonly use moving averages are 20, 50, 100, and 200. Generally, two MAs per chart are enough, but depending on a strategy more or fewer could be used.
We need to look at three important aspects when analyzing a security using moving averages. Their crossover, slope, and price position relative to the SMAs.
Identifying trend reversals with MACD
We talked about how, from weekly timeframe, an underlying trend can be determined by the position of MACD bars and confirmed by formation of bars relative to the trailing average. If the signals contradict, lets say bars form at the top but below the moving average, this could be a sign of a correction wave.
Meanwhile, MACD and price action convergence/divergence warns of a possible upcoming shift in trend. Putting everything together, including price action analysis from the paragraph below, we can confirm a shift in trend.
Identifying trend reversals with price action
You might heard this many times, but the simplest way how to determine trend reversals is to spot breaks in formation of higher highs and higher lows in uptrend, and vice-versa in downtrend.
The above is just a draft
You can find the full article with images and explanations here.
