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​Difference between correction and reversal and how to trade them?

2018-12-17 08:04 am | No Views : 902

Many traders rely on technical analysis in trading or even design their own trading strategy based on some technical analysis rules, so the difference between correction and reversal is important and necessary.
The ability to differentiate between reflection and correction offers a trading opportunity in itself and can be combined with any current trading strategy that adds strength and reduces the opening of wrong trading positions.
Difference between correction and reflection

Why should distinguish between correction and reversal in Forex?

  • Differentiating between them reduces your losses, you will not open a sales center in an upward direction so you will keep your money.
  • If you already have an existing trading center, the difference between the reversal and the correction will push you to evaluate the current positions so you will not maintain a losing contract or go into loss.
  • You can make more profits as you will not close the trading center early due to the correction.

What is a correction?

The correction is a temporary move against the current price. If the current trend of GBP / JPY is bearish, the uptrend is correct and correction usually occurs to attract more traders and profit for retailers.
What is a correction?
For example, the pair failed to break the November 2018 low at 144.24 when visiting the second time, where a false break occurred and then the pair rose to gain more momentum and then fell to break this bottom and actually happened in the first week From December 2018.

What is Reversal?

It is a change in the direction of the current price if the current trend is bearish after a reversal occurs, the trend changes upward.
What is Reversal?
The previous chart shows a reversal in the direction of the GBP / JPY pair as the trend continued to rise over the 240-minute interval from mid-August 2018 until the last half of last October as the bullish trend broke and reversed.

How to distinguish between correction and reflection?

In the following lines, we will mention how to identify each of them as each position has many indications:
During the correction, the volume is weak as the seller is usually a trader and a small speculator, while during the reversal the volume is large. Banks, hedge funds and major companies around the world are in control.
Technical models in times of correction are few and at times where the dominant trend is strong is only negative price behavior or indicates weakness, while in times of reflection there are a lot of price models.
Japanese Candles We can analyze the difference between correction and reversal. In correction times, the majority of candles indicate a state of confusion between the bear and bull, while in the reversal position you will find Japanese reflective candles.
"May benefit you Japanese Candlestick Forms"
The correction usually occurs after large price movements while the reversal occurs at any time.
By the economic news in times of reflection in long-term or medium-term trends you will notice that very important economic news such as a change in monetary policy will be issued. In times of corrections, news is usually weak and there may be no news.
During the correction, the price usually corrects from the 0.38 to the previous Fibonacci retracement of 0.618 and if these ratios are exceeded, the order changes to the current trend reversal.
The correction usually does not break a trend while the reversal inevitably breaks the current trend. Remember the GBP / JPY example. In the first example, the correction was not able to break through the bearish trend line, while in the second example the pair managed to break the bullish trend line because what happened was a reversal.
In the case of a reversal, you find that the SMA 50 and 200 intersect with each other, and certainly on this cross break a previous low or break a previous high on the cross, a reversal occurs in the price.
The difference between the correction and the reversal is what is the correction EUR against the dollar tradingpeek Such as EUR/USD, which continued to trade in a bullish trend from November 2017 to April 2018, and with a deadly cross, the trend reversed.
Next article will explain how to trade on correction and reversal.

The last part: the difference between correction and reflection and how to trade them? Dogecoin .. Electronic currency arose as a result of irony
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