Forex: what are the reversal points for?
The presence of reversal points on Forex is a very important circumstance that forex speculator can use for his own purposes - for profit.
The reversal point is the price (the price level),having reached it, the exchange rate, moving in a certain trend (ascending or descending), tends to one of the following possible scenarios of its further behavior:
- - slowing down the trend, which is unambiguously confirmed by the data of the "candle" and "indicator" analysis;
- - entry of the market "in flat", that is movement of the course in a limited, very narrow "corridor" without a clearly expressed vector;
- - the market reversal and its movement in the opposite directiontrend vector, which can mean both an obvious trend correction, and a relatively short-term "rollback" with the possibility of resuming the course's movement on the previously existing trend to the same pivot point (then there can be a repetition of a similar scenario).
Most often, a characteristic symptom of staythe exchange rate in the immediate vicinity of the turning point can be considered its oscillatory motion in an extremely narrow range. This kind of limited exchange rate fluctuations can usually be observed within the limits of certain price marks, which can be identified as possible reversal points, read more about them .
The existence of the phenomenon of turning pointsis due to the presence of the market certain memory. For example, in the past there have been any events that have affected the market in a way that he was forced to stop its movement in a particular direction, change it to the opposite direction or by clicking "in the flat." Subsequently, these "incidents" will be associated with the "trend" market with certain price levels that were reached by them at the very moment when such "incidents" occurred. In other words, the market will have a kind of "psychological binding" to certain price marks, at which achievement its "trend" movement will lose its former confidence.
Reaching any turning point, the market as it wereis facing a choice: either once again succumb to the "complexes" of the past, or still overcome this "psychological barrier" and continue to move on the trend. As a rule, the market can make a "breakthrough" of the reversal point in two situations:
- - after a certain time, the point of reversal ceased to have psychological power over the market, that is, it became simply irrelevant;
- - in the market there were new events that motivated him to overcome the fear associated with a particular turning point.
The trader's task is to find out in the market on timepoints of a turn with the purpose of acceptance of adequate trading decisions. For this, a variety of methods can be used: graphical analysis (identification of zones of "price stagnation"), signals of mathematical indicators and so on.