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Chapter 19, Part IV. Retracements and Reversals. Page 4

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 21, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

    Aug 28, 2009
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    Properties of Reversals

    As you understand they will be the opposite of retracement ones:

    1. Reversal could happen at any time, but it’s much harder to come after some previous strong move, since market still has an opposite momentum. Still, sometimes it could happen;

    2. If reversal happens, it leads to much longer term movement in the opposite direction compared to retracement;

    3. As a rule reversal often happens by impact of unexpected news or macro data. In other words, when fundamentals do change;

    4. In most cases reversals are accompanied by some reversal patterns – H&S, Double Top/Bottom, Butterfly, 3-Drive, wedge, broadening top/bottom etc. Any of these patterns could include and, as a rule, include reversal candlestick patterns.

    5. Appearing of reversal near strong support/resistance of a higher time frame is more probable. Very often such kind of reversals accompanied by standard divergence;

    6. As reversal point becomes closer, the market starts to show deeper retracements to 0.786 and 0.88, then at last breaks all Fib retracement levels and reverses;

    7. If market breaks pivot support 1 in bull trend or pivot resistance 1 in bear trend – it could be an early sign of reversal;

    8. Long-term trend lines or price channels, if broken, could be an early sign of reversal;

    9. If the market breaks strong area of higher time frame, say, daily time frame market breaks weekly confluence resistance + Agreement during retracement, as it seems, in bear trend – this tells that market is stronger than it seems and probably this is not just a retracement; 10. When the market shows swing in opposite direction greater than previous swing in direction of trend – this is early sign of reversal.
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