Identifying Retracements
A popular way to identify
retracements is to use Fibonacci levels.
For the most part, price
retracements hang around the 38.2%, 50.0% and 61.8% Fibonacci retracement
levels before continuing the overall trend.
If price goes beyond these levels,
it may signal that a reversal is happening. Notice how we didn’t say will.
As
you may have figured out by now, technical analysis isn’t an exact science,
which means nothing certain… especially in forex markets.
In this case, price took a breather
and rested at the 61.8% Fibonacci retracement level before resuming the
uptrend. After a while, it pulled back again and settled at the 50% retracement
level before heading higher.
Another
way to see if price is staging a reversal is to use pivot points
"You can’t change the direction of the wind, but you
can adjust the sails to reach your destinations."
By Unknown Author.
HOW DO I PAY AND REGISTER FOR THE SERVICE?
For subscription rates, payment methods, or to sign up, you
can e-mail: drhari@sslfxguru.com or sslfxguru@yahoo.com. You can also subscribe
online through our website. If you need additional assistance, you can e-mail
us at
support@sslfxguru.com.
"An arrow can only be shot by pulling it backward. When
life is dragging you back with difficulties, just imagine that it’s going to
launch you into something great ."
By Unknown Author.
How to Identify Reversals
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. It’s up there with paying taxes *cough*.
There are several key differences in distinguishing a temporary
price change retracement from a long-term
trend reversal. Here they are:
Retracements
|
Reversals
|
Usually occurs after huge price movements.
|
Can occur at anytime.
|
Short-term, short-lived reversal.
|
Long-term price movement
|
Fundamentals (i.e., the macroeconomic environment)
don’t change.
|
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.
|
|
|
|
|
|
|
|
|
|
|
|
"Love shall be our token; love be yours and love be
mine."
By Christina Rossetti.
"Positive thinking opens the door to miracles."
By James Van Praagh.
What Should You Do?
When faced with a possible retracement
or reversal, you have three options:
-If in a position, you could hold
onto your position. This could lead to losses if the retracement turns out to
be a longer term reversal.
-You could close your position and
re-enter if the price starts moving with the overall trend again. Of course
there could be a missed trade opportunity if price sharply moves on
one-direction. Money is also wasted on spreads if you decide to re-enter.
-You could close permanently. This
could result in a loss (if price went against you) or a huge profit (if you closed at a top or bottom) depending on
the structure of your trade and what happens after.
Because reversals can happen at any
time, choosing the best option isn’t always easy. This is why using trailing
stop loss points can be a great risk management technique when trading with the
trend. You can employ it to protect your profits and make sure that you will
always walk away with some pips in the event that a long-term reversal happens.
"Of what use is the memory of facts, if not to serve as
an example of good or of evil?"
By Alfred de Vigny.
WHY DO I NEED FOREX SIGNAL?
Forex traders agree that timing is everything. Getting into
the market just as it is about to move often makes for the largest possible
profits but can also make large losses. Most traders find it difficult to get
into the market at the right time and impossible to be at their computers 24
hours a day 5 days a week to monitor the market for activity. The SSL FXGURU
signals, can help you become a better trader and alert you to trading
possibilities. Let us be your eyes to the World Currency market.
"Nobody has a perfect life. Everybody has their own
problems. Some people just know how to deal with it in a perfect way ."
By Unknown Author.
What are Reversals?
Reversals are defined as a change in the overall trend of
price. When an uptrend switches to a downtrend, a reversal occurs. When a
downtrend switches to an uptrend, a reversal also occurs. Using the same
example as above, here’s how a reversal looks like.
"A loving heart is the beginning of all knowledge."
By Thomas Carlyle.
"If you think yourselves strong, strong you will be."
By Swami Vivekananda.
What are Retracements?
A retracement is defined as a
temporary price movement against the established trend. Another way to look at
it is an area of price movement that moves against the trend but returns to
continue the trend.
"Be happy for no reason, like a child. If you are happy
for a reason, you’re in trouble, because that reason can be taken from you."
By Deepak Chopra.
WRONG!
You’ve been hit by the “Smooth
Retracement!”
Nobody likes to be hit the “Smooth
Retracement” but, sadly, it does happen.
Why?
In the above example, the forex
trader failed to recognize the difference between a retracement and a reversal.
Instead of being patient and riding the overall downtrend, the trader believed
that a reversal was in motion and set a long entry. Whoops, there goes his
money!
Check out how Happy Pip got fooled
by the “Smooth Retracement” in one of her AUD/USD trades.
"Sometimes you face difficulties not because you’re
doing something wrong, but because you’re doing something right."
By Joel Osteen.
"Who you associate with dramatically influences the way
you behave and how excellently you perform."
By Robin Sharma.
Retracement or Reversal?
Have you ever been in this situation before?
It looks as though price action may be rallying and a buy
trade is in order.
"It’s not that I’m so smart, it’s just that I stay with
problems longer."
By Albert Einstein.
Conclusion
Whether you’re trading a pair that’s
in a trending or ranging environment, you should take comfort in knowing that
you can profit whatever the case may be.
Find out how you can pick tops and
bottoms in both trending and ranging market environments.
By knowing what a trending
environment and a ranging environment are and what they look like, you’ll be
able to employ a specific strategy for each.
As the old wise man in Central
Park says, “Only a fool dips his cookies in habanero salsa!”
"When obstacles arise, you change your direction to
reach your goal; you do not change your decision to get there."
By Zig Ziglar.
Bollinger Bands in a Ranging
Market (Part 2)
By buying near the low price, the
trader is hoping to take profit around the high price. By selling near the high
price, the trader is hoping to take profit around the low price. Popular tools
to use are channels such as the one shown above and Bollinger bands.
Using oscillators, like Stochastic
or RSI, will help increase the odds of you finding a turning point in a range
as they can identify potentially oversold and overbought conditions. Here’s an
example using GBP/USD.
Bonus tip: The best pairs for trading
range-bound strategies are currency crosses. By crosses, we mean those pairs
that do not include the USD as one of the currencies in the pair.
One of the most well-known pair
for trading ranges is the EUR/CHF. The similar growth rates shared by the European
Union and Switzerland pretty much keep the exchange rate of the EUR/CHF stable.
"Change your thoughts and you change your world."
By Unknown Author.
HOW TO CHOOSE A GOOD FOREX SIGNALS PROVIDER?
Selecting a good Forex signals provider requires some common
sense and a bit of investigative work. Do not take everything at face value and
rest assured that amongst the legit professionals out there, there are many
swindlers who are preying on the naive and inexperienced Forex traders. Since
almost everyone can set up a professionally looking website in a matter of
minutes and listing fictitious performance results is nothing new, you should
always take the time to verify the numbers. Read reviews, visit some of the
large Forex forums, and speak to past subscribers in order to verify the
legitimacy of the Forex signals provider that you are considering. Find out if
their website has been around for at least as long as their trading history and
see if the provider offers back testing, which will allow you to confirm the
quality of their Forex signals.
Some Forex signals providers send the alerts to third party
websites, which then rank all of them based on their daily, weekly, or monthly
performance and allow the traders to filter the various providers based on the
system type, total gain, drawdown, and other factors. As a final resort, you
can visit some of the large currency trading message boards, where all Forex
related services are openly discussed and try speaking to past subscribers and
find out more about their experience.
Keep in mind to be disciplined and patient while trading to
avoid losses. Always trade with what you can afford to lose, exercise good
money management, and try to learn as much as possible in order to become a
successful trader!
"Be amongst the few who dare to follow their dreams."
By Steve Maraboli
"The average man can’t prove of most of the things that
be chooses to speak of And still won’t research and find out the root of the
truth that you seek of."
By Damian Marley.
"Nothing is permanent in this world not even our
troubles."
By Charlie Chaplin.
"Some people feel the rain, others just get wet."
By Bob Marley.
"Defeat is a state of mind; no one is ever defeated
until defeat has been accepted as a reality."
By Bruce Lee.
