Determining the Retracement Area Correctly
There are two types of price changes that are usually considered to mark the best forex trading opportunities, namely reversals and retracements. Unfortunately, many traders do not understand what retracements and reversals are. Yups, this time we will discuss the retracement first so that traders understand what a retracement is and how to determine the right retracement area.
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 will occur in the middle of a bullish trend, while a bullish retracement will occur in the middle of a bearish trend.
Retracements are easier to detect than reversals. Retracements can be detected using channels or using Fibonacci levels, pivot points, or trendlines found in the Metatrader 4 and Metatrader 5 platforms.
In general, there are several signs of retracement that can be recognized, namely:
- The occurrence of profit taking by some traders. However, these traders are only a minority. Meanwhile, the majority of traders maintain their positions because there is no news or events that indicate that the trend will reverse direction, so that the trend will return to its origin when the correction caused by profit taking by some minority traders has been completed.
- The price is near a certain psychological level, but that psychological level is not an important resistance level in the long term.
- Does not have a specific form of candle pattern and price pattern or often also has a light impact candle pattern, such as a single or double candlestick pattern
- Does not have the form of a price pattern of significant significance, such as those in reversal signs.
Thus this short article, may be useful for all traders. Watch the video below if you still don't understand!
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