Resi.co.id – Taking advantage of potential price trends is very attractive, especially because that is where big profits can be made.
But oftentimes, many traders feel unlucky because they “don’t understand” the trend, that is, they enter when the trend has started to weaken.
Even if they manage to process forex trading strategies with trend-following methods, the acquisition is not as much as the potential achieved by entering the beginning of the trend.
That is why more and more traders want to recognize trend formation as soon as possible. This is where the Forex trading strategy for recognizing trend reversals (reversals) comes from.
Basically, the method predicts the arrival of a price reversal before it actually occurs. There are 3 well-known forex trading strategies that are commonly applied to predict trend changes, including:
1. Forex Trading Strategy With Candlestick Analysis
Candles have long been a powerful weapon for reading price movements, even for recognizing possible trend changes. This forex trading strategy is basically focused on candlestick reversal patterns such as pin bars.
A pin bar pattern is a single candle formation whose body is small, but its upper or lower wick is very long. The shape reflects the price’s refusal to continue the previous trend, so that in the next step the price will start to reverse direction.
To increase signal validity, this forex trading strategy often combines candlestick reading techniques with support and resistance. The method is simple, because it only identifies the formation of a reversal candlestick pattern in key support or resistance areas.
2. Forex Trading Strategies With Price Patterns
A Forex trading strategy that reads price movements on a chart is done by introducing not only candles, but also price patterns. These patterns usually consist of several price movements that form a single formation and are known as trend reversal indicators.
One of the common price patterns identified in this forex trading strategy is the head and shoulders. This pattern is characterized by the formation of the “left shoulder”, “head” and “right shoulder”, so that it resembles a head pattern flanked by the shoulders on both sides.
When deciphering this unique pattern, there is a common understanding that the formation of the “head” reflects an attempt by buyers to increase the price, as it appears higher than the “left shoulder”.
When the next buyer does not succeed in raising the price completely (judging by the formation of the “right shoulder”), that is the moment when the buyer power begins to weaken and has a chance to be replaced by the dominance of the seller. In Forex Investment Strategy, the scenario will only be confirmed when the price continues to fall until it breaks through the neckline and closes below that level.
As a marker of a bearish reversal, the head-and-shoulders pattern usually occurs at the top of an uptrend. Several other price pattern formations that indicate a trend reversal have a theory that is not much different from the understanding of head and shoulders. Here are some common examples of price patterns used in forex trading strategies with changing trends.
3. Forex trading strategy with divergence
After examining the various forex trading strategies above, you may be wondering why there is no single forex trading strategy that uses technical indicators. Aren’t indicators a kind of “magic tool” that can tell us where the price is going?
First of all, it should be understood that no matter how sophisticated and complex an indicator is, and no matter how good it looks, it is only a manifestation of the results of the above price calculations.
Therefore, the indicator signal is always delayed. Therefore, the indicator only gives an idea of what happened to the price in the past, it does not show where the price will move next.
The lagging nature is also what makes indicators less reliable in Forex trading strategies with trend reversals, which really prioritize signal recognition before a reversal occurs, not after.
However, this does not mean that technical indicators do not contribute to this forex trading strategy at all. In fact, there are different types of oscillator indicators (RSI, Stochastic, CCI, Momentum, MACD, etc.) that can be used in Forex Investment Strategies.
This function is not really the main use of the oscillator. However, because this type of indicator can show the momentum of the price trend moving, the difference between the movement of the Indicator and the price can be signaled as a reversal signal.