Podcast:

#203: How to Trade a Reversal and Retracement

In this video:

00:28 – How to tell if the market is trending, in a reversal or a retracement

00:48 – The result of the US Election

01:21 – Strength in the USD and GBP

01:50 – A reversal or a retracement?

02:35 – I use Bollinger bands to help identify where the market is trading

05:30 – Consider the Daily strength to assist your trading

08:01 – Trading from the right hand side of the chart is what makes a good trader

How can you tell if the Forex market is reversing or it's just in a pullback or a retracement? Let's talk about that and more right now.

Hi Forex Traders, Andrew Mitchem here from The Forex Trading Coach, this is video and podcast number 203.

How to tell if the market is trending, in a reversal or a retracement

I want to talk about a question that I've been emailed from Darren in the UK who said, “Hi Andrew, can you talk about whether, or how to tell whether a market is trending, it's pulling back or it's in a reversal or a retracement?” It's an issue that we all face as traders.

The result of the US Election

I'm going to talk about that really shortly, but first before we get into that, I‘ll need to just talk about the US election because on last week's video and podcast, I said, I wonder what's going to happen? I suppose in all honesty, against all odds, Donald Trump will be very shortly the next US president, number 45 I believe. It just goes to show out there that you just cannot tell what's going to happen because of course all the polls were suggesting Hillary Clinton was a clear winner, but reality said that it was not to be.

Strength in the USD and GBP

Right now, actually the US dollar, although it was pretty volatile when it came out, the US dollar is actually strengthening a lot and interestingly, also is the British pound. I suppose with the British and the Brexit issue. In someways there is some similarities between voting for Trump, and so it's actually given strength to the British pound which is quite interesting. Just keep an eye on your charts and your trading, and really trade what you see on the charts.

A reversal or a retracement?

Back to the topic of today's video and podcast, how do you tell if you're in a reversal part of the market, or how do you tell if that trend is going to continue? Let's say the market is moving up and you get a reversal signal, and how do you know that's going to reverse the wrong way, or how do you tell that's just going to pull back a little bit and then continue upwards again and of course the same for a sell trade but in reverse. Really, it's very difficult. Right at the time of the reversal signal, it's very difficult you don't really know whether that's going to be the start of a massive change in direction or that's just going to be a slight pullback and then it continues again.

I use Bollinger bands to help identify where the market is trading

There's a few things that I use that can help you with to find out more, and I use Bollinger bands. I love Bollinger bands, they give me a fairly good guide to what part of the chart that prices in right now. Because, if you just have price on your charts, it's really hard unless you're of course, you're using support and resistance lines, and round numbers, which I use as well. Without Bollinger bands, it's really hard to see if the market is sort of likely to reverse or likely to pullback. I'll give you some examples. I'd love to use reversal signals when the market is … When I see reversal signals and the market is nearly upper or lower Bollinger band.

If you've had a lovely trend upwards, and go and look at your charts, it doesn't matter what time frame chart. You've had a really good move upwards, a good strong move upwards,