Like other traders, you may already know that when it comes to succeeding in the foreign exchange market, relying on a single strategy for determining high confidence Forex reversal zones isn’t a good idea. Even if an approach has worked wonders for you before, it doesn’t mean that you have to stick to it for a long time. Insisting on doing so may just result to you not wanting to be associated with forex – ever.
Here are 3 strategies you may consider:
- Look out for price distributions. Since prices change regularly, you can be assured that there will be a reversal once you are familiar with the current figure. That, and you will know exactly where it fits in the market. As reference, you can rely on price charts in the past. Remember, though, not to search too far back. To identify price distribution, among the things you can do are measuring the position within the final price range and estimating the position of the current price. By using these, and other means, as well, you can move toward the objective, which is to determine the last figure’s location.
- Observe Forex volatility levels. They follow a trend, which means they are likely to move up and down within a range. In most cases, when they are high, the premiums are high, too. Conversely, when they are low, the premiums are low, too. Since they can inform you when prices are set to decrease and increase, they can help you determine a reversal zone. Regardless of the technical analysis tool you are using, measuring volatility gives you a sign that prices are heading a certain direction. For instance, if the current volatility level is low, prices may reach that area at 4 PM.
- Pay close attention to Elliot Waves. Since the relationship between a series of waves can be an instrument in identifying ranges, which are likely to result to the continuation of a larger trend, monitoring price movements based on how they fare well together can give you an advantage.
Additionally, by using Elliot Waves, you can also identify when a stop needs to be taken. Since they reveal a trend’s maturity, they can define the time to take a break from trading. Instead of continuing to watch out for a reversal, it provides you important information such as the point when prices are not known to retrace their pattern, and the price that is not expected to go up or down any farther.
References:
http://en.wikipedia.org/wiki/Elliott_wave_principle
http://www.mtrading.in/analytics/wave-analysis/