Friday, May 18, 2007

Detecting trend reversal on Forex

I know that: "How to detect trend reversal?" maybe a thought question with very complex answer but I will try to make my take on it, and keep it very simple and understandable.

So let’s get started, obviously when trying to detect trend reversal on Forex you have to use tools that were designed for it. You can’t predict it with MACD or RSI because they are trend following indicators. Indicators designed to predict trend reversal are … candles. Japanese always traded reversal strategies, European and US traders are almost always trend following traders.

If you don’t know how to interpret forex candles then do a search on web and find some info, reading correctly candles is easy and you have to know it. Although keep in mind I do not recommend using them on charts smaller then 4H.

Of course … relying only on Japanese techniques can be quiet deceptive so we need something more reliable, we need to have an angel. Trend reversal candles can happen anywhere on the chart, will they always mean end of the trend? … No, the really important candles are those which can be found near support and resistance levels. We want to know if this particular level will be broken or not.

Let’s pretend we have reverse candle near support, is it time to buy some lots? Again the answer is NO. Take your time, the next candle should be white which is confirmation that trend was reversed, there can also be consolidation period near resistance level, which is usually another sign that trend is reversing, in this case I would put long order at the resistance of consolidation block.

Where to put stop loss? I put it about 100 – 200 pips below my order depending on situation. I mean if important resistance or support line is broken and price move fast in opposite direction (eg. 100 pips) then there is really no point in holding this position any longer, trend wasn’t reversed.

Well, I hope this helps some of you, but if you are going to use this techniques then keep in mind they apply to longer timeframes! I use it with 1D charts, if you will use it with 15M chart you are going to blow yourself out.


Lack said...


I just discovered your great looking blog while researching for my website.

Good information and advice! I will be visiting more often.

Keep up the excellent blogging.


C Y Lack

Lack said...


If you don't mind, I like to leave a backlink to my website at

Thanks and regards

Forex Signals said...

You have some great information, tips and advice for Forex traders. Good job on a very resourceful Forex blog! If you want, take a look at our Forex signals service and tell us what you think. We are predicting the times the market will change direction on a daily basis will incredible accuracy. We are looking for feedback from professional Forex traders and offer a free trial.
Visit us at

Forex Signals Pro
Forex Signals

POO said...

Hi, thanks for very good article.

I have a question regarding your article. Let say, I'm using D1 chart to watch the reversal pattern, then what is the suitable Support & Resistance level to refer? Should I use Pivot Point and what's the suitable timeframe for it?

lucky said...

Excellent information and well written blog on Forex :)
Good Luck !!

Extreme said...

A Good Forex System means you need to constantly have high probability trades. You also need to be aware of all the currency pairs in real time. This Forex website would surely help. Remember, no system will be full proof, so be cautious about the claims some trading systems make.
Good luck for Forex Trade.

Extreme said...

Check out more forex trading tips here
Good luck for Forex Trade.

Forex Master said...

Hi my friend.
This will change the world.!!
ForexSignal30 extreme ver. 2010
- Limited Edition -

Why would you pay monthly fee ($100-$1000) permonth to companies for forex trading signal if you can finally create them by yourself with this system ?

Forex + Forex Signal 30 Ver. 2010 = The Best Way Fast Get Rich

The word FOREX is derived form Foreign Exchange and is the largest financial market in the world. Unlike many markets, the FX market is open 24 hours per day and has an estimated $1.5 Trillion in turnover every day. This tremendous turnover is more than the combination of all the worlds’ stock markets on any given day. This tends to lead to a very liquid market and thus a desirable market to trade. Unlike many other securities (any financial instrument that can be traded) the FX market does not have a fixed exchange.

From: Mr. George Kent
Dear fellow Forex trader,
Hello, My name is George. I have been a forex trader since more years. From time to time I still trade, but my trading times have increasingly dropped since I feel it is more and more boring waiting for the market to give you a proper signal all day. The main reason why I am publishing this formula is because I do not like to sit behind my desk all day. So I have decided to give it to all of you who want to benefit from it. May the knowledge bring you success and wealth and if you get both in abundance, remember to share it with those around you.
This formula is aimed at simplicity as well as high probability trades.







Give me just a few minutes and I will show YOU how
Forex Signal 30 can beat the markets and send the
winning trades your way, for a change.

It's as simple as that.
You've tried to imagine a step-by-step Forex Signal that guarantees you more than your fair share of winning trades every single time you hit the Forex Markets. Well, you can stop imagining, because with the Forex Signal 30...

- "Forex Signal 30" System is as easy as BUY and SELL.
- Accuracy 100% Win.
- +10-500 pips per signal
- 3-10 signal every day on the 1 H charts
- Signal Never Late
- Has been used by thousands of people from all over the world
- Work For All Timeframes
- This is not trading robot!
- It is used by professionals & beginners alike with no experience whatsoever.
- You can work from any country in the world
- A highly profitable system that lets you earn thousands of dollars each day.
- Reliable and consistent.
- It's easily and quickly understood by the average independent trader as well as newbies!
- Trade forex without stress!


Why would you pay monthly fee ($100-$1000) permonth to companies for forex trading signal if you can finally create them by yourself with this system? Thousands trader was joined here from around the world, averages beginner at the end they become expert.

I am sure you will enjoy the tremendous benefits the Forex Signal 30 will bring you. So sure that I offer a 100% Money Back guarantee.

Enjoy the profits! :) - Forex System 100% accurate and No Loss. Forex signal 30, forex signal, forex signal indicator, forex no loss, accurate forex, forex signals, true forex signals, forex signal 30 extreme.

Learn to Trade Forex said...

When the chart is making higher high and higher lows, that means that the trend is up.

On the contrary, when the chart s making lower lows and lower highs, again it indicates that the trend is down.

This is much more accurate espcially on lower time frames.

Forex EAs Review
Forex EA

Rupom said...

Please post more details...

Trader Signals said...

No, the really important candles are those which can be found near support and resistance levels. We want to know if this particular level will be broken or not.
Forex Trading Signals Review

Blogger said...

AvaTrade is the most recommended forex trading platform for beginning and professional traders.