Retracements in Forex Trading
Retracement in forex is a temporary reverse movement of a price against the existing trend. A retracement does not signal a change in the larger trend. In a generally rising price chart, a retracement is a small decline in that price.
A retracement is a price change that is temporary (temporary), only lasts in the short term or a few days, and is only a small correction in a larger trend because there is no change in the fundamental outlook. A bearish retracement (bearish retracement) will occur in the middle of a bearish trend. Generally, a retracement is characterized by several situations, including:
1. Fundamentally, there are no events or news releases that will change the economic outlook of the country of origin of the currency concerned in the long term. The retracement indicates a correction due to the speculators taking profit on a small scale. However, because the big traders did not change their projections for the currency and kept the trader's trading position, the price movement reversed back to its original trend.
2. Technically, the price is near a certain psychological level, but that psychological level is not an important resistance level in the long term. However, note that the past range retracement could be a location for a future reversal if its relevance as a resistance level increases.
3. Technically, only a light-impact candle pattern is formed (single/double candlestick pattern), or even no specific candle pattern is formed at all.
4. Technically, it does not include a significant price pattern, such as a rounding bottom, rounding top, double bottom, double top, and so on. In addition, if a regression channel is drawn between the peaks and valleys on the price chart, dynamics appear.
In addition to being detected using channels, retracements can also be tracked using Fibonacci levels, pivot points, or trendlines.
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