We are talking about the most important topic in forex trading technical analysis. Every Trader should know about trends in forex and how to identify trend reversal in forex.
ABC of technical analysis is “Always trade with Trend”. It means we have to apply our strategy in the direction of the trend and we should avoid moves against the trend.
Bullish trend refers to consecutive higher highs and higher lows in the price of a currency pair in forex during a specific timeframe. it shows that there is strong buying pressure. A lot of traders are buying the currency and buyers have dominated the sellers. This results in the upward movement of price with time.
The formation of consecutive lower lows and lower highs in the price of a currency during a specific timeframe is called a bearish trend. It indicates strong selling pressure. A lot of traders are selling the currency which results in a downward movement of price with time.
how to identify trend reversal in forex?
A bearish trend reversal happens when the last lower high in the price breaks. On the other hand, a bullish trend reversal happens when the last higher low breaks.
We will discuss the trend reversal strategy using a live example of the EURJPY weekly timeframe. EURJPY is making Lower lows and lower highs since 2018. The last high was in the month of March. Price has made four Lower lows and Three lower highs and now in the month of June 2019, the price has broken the last lower high. It means the price is looking for a reversal. The down move is about to end.
Now you will be able to do trend analysis in every setup or analysis before placing an order. Don’t forget to do trend analysis every time before placing a trade.
I hope you will like this Article. For any Questions Comment below, also share by below links. Use Tradingview for technical analysis instead of mt4.
Note: All the viewpoints here are according to the rules of technical analysis and for educational purposes only. we are not responsible for any type of loss in forex trading.