Advance knowledge of reversal trading in Forex market

[andrews]

“Trend is your friend” a well-known proverb in the Forex market. But do you that the prevailing trend of a certain financial asset often gets changed? If so then we must say that you are in the very early stage of your trading career. Nothing in this world is absolutely similarly in Forex no trend is permanent. But still, most of the traders are told that they should trade in favor of the long term trend. It’s true that if you trade the market in favor of the long term trend then you can easily avoid many losing trades. But considering trading as your full-time profession you should also learn the perfect way to trade the trend reversal. In fact, reversal trading can be profitable if executed in the right manner. There are some expert reversal traders in the United Kingdom making tons of money just by trading the reversal. Today we will discuss how to trade the trend reversal without risking too much of our trading capital.

Fundamental news releases and its impact
Before you being our journey we must know the exact reason behind the trend reversal. Most of the time, the long term prevailing trend often gets changed due to the major news release. The professional traders simply use their technical and fundamental analysis skills to spot the trend reversal in the market. If you are completely new to this industry then it’s better for you not to trade against the long term prevailing trend. Most of the time trend trading is the job for the advanced professional. However, if you can do the perfect fundamental analysis then even with a very little experience you can master this skill within a short period of time. But always remember that this technique is a very risky and it also requires very precise knowledge of technical and fundamental analysis.

Use the Fibonacci retracement levels
The easiest way to spot a trend change in the market is by using the Fibonacci retracement tools. There are many traders in the options trading industry using the Fibonacci retracement tools to execute their orders in favor of the long term market trend. However, you should know how to draw the key retracement level of the market. For instance, if you are looking for bearish trend reversal then you need a clear break of the bullish retracement level. Though there are many important Fibonacci retracement levels we will only consider 61.8% Fibonacci retracement to consider a trend change in any currency pair. For instance, if a certain pair is in an uptrend then you need to draw the bullish retracement level from the most recent low to the recent high. Once the retracement levels are drawn it’s now your duty to wait for a clear break of the 61.8% retracement to execute your short orders against the long term trend.

Use the Japanese candlestick pattern
Spotting the trend reversal is extremely easy if you learn about price action signal. Every single candlestick will tell you about the bulls and bears in the market. So if you can learn about the reliable candlestick pattern then once you spot a break of major highs or lows in the market wait for the price action confirmation signal to trade in favor of the newly formed trend. Since this system is extremely risky you should never risk more than 1 % of account capital in single trade. The less risk you will take the better chance you will have to make money in this industry.
Counter trend trading is a little bit complex and risky for the new investors. But if you can learn about the fundamental analysis and master price action trading system then it’s really easy for you. But make sure that you also learn about price action trading system to minimize your risk exposure in reversal trading.