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The last part: the difference between correction and reflection and how to trade them?

2018-12-18 09:36 am | No Views : 192

In the previous article, we explained at length the difference between correction and reflection and also pointed to several signs that we can distinguish between correction and reflection, we recommend reading the previous article if you did not read so there is nothing unclear.
Traders in Forex usually want to take advantage of reflections not from the current trend, which is surprising as all professional traders and senior technical analysts talk about following the current trend and trading with it.
There are many statements such as the Trend Is Your Friend to confirm the above, but the current question is how to buy in a bullish direction, for example, or how to sell in a bearish direction?
Of course the answer with the correction correction gives us the best areas to buy or sell it makes no sense to buy at the top or sell at the bottom as that, the buyer at the top will not find anyone buys from him at a higher price at the top and will not be able to make profits.
While a trader waiting for a correction and a buyout will naturally make a profit.
Example GBP/JPY is buying a correction
Example of GBP / JPY In the previous chart we notice that there is a sign of 1 which indicates the top. The trader who bought at the top waited for a major price correction until the price returns to the buying zone. Also, wait for a correction from 8/12 to 5/1 Month to return the price for the same point.
While the second figure we notice that the buyer waited for correction and bought at the rate of 0.618 thus achieved double profits.

How do you trade the correction?

First of all, the current trend should be determined. If, for example, the trend is currently bullish, drawing the ascending trend line at least should connect two points to each other (one of the rules for drawing the rising trend line).
The second step is to draw a Fibonacci correction on a previous wave and wait for the price to reach 0.618 or 0.786 to buy with a positive price behavior if the current trend is weak. However, if the current trend is strong, the purchase is with a positive price behavior at 0.382.
Stop loss is below the bottom in case of buying at 0.786 levels but in case of buying at 0.382 it is at 0.50.
Take Profit is at 2: 1 (twice the stop loss) if you are a short term trader but if you are a medium / long term trader you can wait until you see signs of weakness in the trend.
On the downside, it will be a selloff in the same areas with no change and the loss will be at the top instead of the bottom in the previous case and the rest of the conditions unchanged.
Example GBP/JPY Trading Corrected Sell
And the previous chart of the pair sterling to the yen to clarify, we note in the area 1 opened the center of the sale result of a negative price behavior at 0.382 Second point stop losses at 0.5 Third bluff out of the speculator with twice the stop loss point IV Exit traders on the trend with the Negative price behavior and signs of weakness of direction.
There are classic price models Continuing their application with the previous strategy helps in determining the target and is reliable in trading to view click here and to read the second part click here.

How do you trade on a reversal?

Reflections can be traded in several ways, the most important of which at all is the breakthrough / break the trend line, in the case of the upward trend we will apply the following rules:
  1. Waiting for the bullish trend to break after a long uptrend that will continue for several days.
  2. We analyze the fraction. If we have a defect in the base of the bullish trend, such as breaking a previous bottom and forming a lower top than the other, make sure that the break that has occurred is real.
  3. We sell after the retest fails to breach the broken trend line.
  4. The closing of the position shall be by breaking the descending trend line or any other preferred method of the trader.
  5. Stop loss is usually at the top of the peak but in some cases the stop loss is large or does not bear the account of the trader, so we recommend to follow the way to stop losses appropriate.
The following chart shows how trading on the upside reversal is bearish.
How trading on the upside reversal
The chart below shows how trading on the reversal of the bearish trend is to the upside.
How trading on the reversal of the bearish trend to the upside
An other way:
It intersects the SMA 200 with 50 and calls this intersection the name of the deadly crossroads if it is a negative cross if it is positive it is nicknamed the Golden Cross.
In the case of a negative cross, we sell in case the SMA 50 is breached for the 200 SMA. Either the profit zone will be with a positive cross or if the bearish trend breaks.
EER/USD Average 200 Deadly Junction with 50 Tradingpeek
On the other side, we will buy if there is a golden cross and a previous high is broken as in the following chart.
The Golden Interchange is a simple 200-inch moving average with 50 Euros Tradingpeek
Usually a breakout occurs with a negative intersection or a broken trend line.
We recommend each trader to apply his rules to exit the position and stop losses.
It is preferable to merge trend lines with this method in order to trade on the most accurate opportunities only.
It is also possible to trade the reflections using classical and harmonic price models. It is useful and as it is characterized by the existence of specific areas to stop losses and determine the profits you can see the price models from here, either compatibility can be seen from here.
All of the above can be applied to all price tires from the beginning to the end of the year, but we recommend applying the tires starting from the four hours to avoid hitting the stop loss.


Technical analysis and outlook for most currencies - commodities and Shares for 2019 ​Difference between correction and reversal and how to trade them?
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