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Forex strategy is amazing

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But to benefit from foreign exchange, one needs to apply the right strategy. How to choose it? If you are looking for a simple yet reliable approach, you should try Trend Trading. As you may grasp from the name, this method requires you to trade in the direction of the existing trend.

By the way, trends can be easily defined by the best forex EA or so-called expert advisors. All you need to know with this strategy is when to exit your current position so that you can lock in gained profits and limit your money losses. Depending on the market situation and your skills, it can be from a few weeks to years. So this is a long-term approach that requires a macro view. With Position Trading, one should ignore small fluctuations taking place in the market.

This approach also relies on analytical data, such as moving averages as they help to determine the best entry and exit positions. With this method, you need to consider support and resistance. Their levels are basically the highest and lowest ends that currency price hits before going in the opposite direction. And what tools are needed to implement this strategy? You should apply RSI and a stochastic oscillator for defining some overbought and oversold conditions.

As said above, Forex is linked to the global economy. Foreign exchange is largely influenced by world economics. With the News Trading method, you can predict both daily market movements and breakouts. In this case, you are supposed to rely on economic calendars and indexes. For example, you must consider CCI or the consumer confidence index as it defines in what direction price will move.

Of course, small fluctuations may go against major trend directions. You may examine the foreign exchange market every hour or day instead of analysing overall trends. By the way, traders also should hold their position overnight to benefit from trading.

This is one of the most popular strategies used nowadays. Scalping is ideal for those who are not ready to take big risks. With this approach, you will have to conduct an ongoing analysis of price movements. Scalpers buy and sell currency pairs to shave small profits from each trade. Some forex traders with deep pockets and a decent appetite for risk might use news trading strategies, although they are probably not ideal for forex beginners.

These strategies can be based on fundamental and technical analysis and they generally benefit from the notable volatility often seen in the forex market immediately after key news releases. News traders typically need to monitor economic calendars for key data releases. They then watch the market closely before the event to determine key support and resistance levels so that they can react quickly after the event based on the results. News traders need to maintain strict discipline when managing their currency positions during such fast markets and often place stop-loss and take profit orders in the market.

An example of an economic calendar and a data release event that a news trader might use is U. In the situation below, the previous unemployment claims number was 3,K, the expected number was 2,K, and the result was worse than expected at 2,K. This should have put pressure on the U. Swing trading, sometimes also known as momentum trading, consists of a medium-term trading strategy that aims to capture more market moves.

Swing traders do this by trading both with major trends and also against them when the market is correcting, so they should be willing to hold overnight positions. Swing traders tend to focus on entering and existing positions based on momentum indicators that provide buy and sell signals. Traders use them to find overbought or oversold markets they can sell or buy. Swing traders might also buy ahead of support or sell before resistance levels that develop on the charts of the exchange rate for a currency pair.

Trend trading is a popular longer-term forex trading strategy that involves following the prevailing trend or directional movement in the market for a particular currency pair. This strategy often involves buying on pullbacks in up trends or selling on rallies in down trends. After a trend trader has taken a position in the direction of the trend, you will probably hold onto it until the market reaches their objective or the trend starts reversing.

Trend traders often use trailing stop loss orders to guard their profits if a significant reversal materializes. They might also use longer and shorter term moving averages and watch for crossovers to signal a potential reversal. You can start the account opening process today and most brokers will let you open a demo account first to try their services out and trade without any risk before depositing your money. CedarFX offers access to a wide range of tradable securities, including stocks, futures, major and exotic forex pairs, cryptocurrencies and more.

Though CedarFX could introduce a few additional educational resources, the broker remains a unique option for traders invested in giving back. IG is a comprehensive forex broker that offers full access to the currency market and support for over 80 currency pairs. The broker only offers forex trading to its U.

Though IG could work on its customer service and fees, the broker is an asset to new forex traders and those who prefer a more streamlined interface. With a massive range of tradable currencies, low account minimums and an impressive trading platform, FOREX.

Take time to educate yourself about those facets of trading forex, too. If you feel confident in your strategy and the broker you chose, then you can open up and fund a live account to start trading with real money. How profitable you are with forex depends on you! To make a profit through forex trading, you must know how to trade intelligently and you also need a trading strategy.

Trade with risk capital only — this is money that you can afford to lose. Regardless of what market you plan to trade, the online broker you choose is extremely important to your success. The broker you choose should be well-regulated. Put together a trading plan that lays out an appropriate position sizing method and clear risk parameters.

You can devise a trading plan and practice using it in a demo account. The most popular include scalping, day trading and position trading. The most significant are the lack of sufficient capital and over-leveraging with margin. Read More. Forex trading is an around the clock market. Benzinga provides the essential research to determine the best trading software for you in Benzinga has located the best free Forex charts for tracing the currency value changes.

Let our research help you make your investments. Discover the best forex trading tools you'll need to make the best possible trades, including calculators, converters, feeds and more. Compare the best CFD brokers to find which one is best for you.

Choose from our top six picks based on platform, security, commissions and more. Compare the best copy trade forex brokers, based on platform, ease-of-use, account minimums, network of traders and more. Ready to tackle currency pairs? Benzinga's complete forex trading guide provides simple instructions for beginning forex traders.

Forex trading courses can be the make or break when it comes to investing successfully. Read and learn from Benzinga's top training options. If you're beginning to trade, learning how to read forex charts is integral to your success. We're taking a look at the primary charts you need to know. Benzinga is your source for anything Forex, and we're detialing the best forex books to read when trading in this profitable market. Learn more about trading forex and the 5 indicators to help you understand the forex market.

Compare forex brokerages today. Compare forex brokers. Disclaimer: Please be advised that foreign currency, stock, and options trading involves a substantial risk of monetary loss. Neither Benzinga nor its staff recommends that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. All information contained on this website is provided as general commentary for informative and entertainment purposes and does not constitute investment advice.

Benzinga will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on this information, whether specifically stated in the above Terms of Service or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation. CFDs and FX are complex instruments and come with a high risk of losing money rapidly due to leverage.

You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Financial engineering has created many exotic instruments with the potential of generating considerable returns. However, one should always bear in mind the high risk involved with such operations. Want to advertise with us?

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Corrections are price movements into the direction opposite to the underlying trend. In the screenshot below, the market was in an uptrend and pullbacks corrections are the short periods where the price moved sideways or against the trend direction.

A pullback trader either waits for the price to continue into the direction of a trend or even gets into trades when the market moves lower. The danger of the second approach is that the pullback will not turn around. Not always does a market provide a pullback. The example on the left shows a market where the price just went down but never made a pullback.

The second and third phase had multiple pullbacks and offered good entry opportunities for pullback traders. As you can see already, pullback and trend following trading have a lot of overlap and trend following trader often also trade pullbacks as a natural progression.

There are, of course, many different ways how pullbacks can form on your charts. In the screenshot below, there are 3 examples. Moving averages are a popular tool for pullbacks as well. When the price is in a trending market and then comes back into the moving average, a pullback can be traded. As we will see when we talk about breakout trading, we can also trade so-called price formations as pullbacks. In the screenshot below, the price was in a clear downtrend when a head and shoulders formation formed.

In such a context, the head and shoulders formation becomes a trend-following pattern and can be regarded as a pullback. The lines between pullbacks and trend-following are blurry here. Reversals are turning points and a reversal marks the true origin of a new trend. Therefore, reversal trading can be considered very early trend following trading too. However, it is usually more effective to choose between classic trend following and reversals because each trading approach has its own unique characteristics.

The screenshot below shows a chart with different market phases and trend stages. Trend following traders will usually go for the early or mature trend. A reversal trader starts paying attention to a market once a market is entering the mature trend stage. This usually happens once at least 2 or 3 trend waves have formed. The dangers of being a reversal trader are being too early and constantly acting in a contrarian mindset. Many failed reversal traders are trying to predict a market turn way before it happens.

When it comes to reversal tools, divergences are the classic confirmation. The RSI divergence shows exhausted trends where the trend power is fading. When a mature trend gives you an RSI divergence, a reversal can often happen. The RSI is usually a trend indicator, but when the RSI shows that a trend is losing strength, it can work very well as a reversal tool too. I view myself as a classic reversal or very early trend-following trader too. Breakouts can happen during trend following and also during reversal trading.

Breakout periods are often the link between two trending phases. A breakout describes the move away from a consolidation pattern. Consolidation patterns, as the screenshot below shows, can happen at market turning points tops and bottoms for reversals or during established trends.

The screenshot below illustrates how consolidations and breakouts are the links between two market phases. A consolidation can happen at market turning points and breakouts are then trend reversal signals. If a consolidation happens during an established trend, a breakout comes a trend following signal. This screenshot below highlights this characteristic once again and it becomes obvious how breakouts connect the different market phases.

As a trader, it is usually best to choose one specific type of breakout. Trying to trade all breakouts can lead to bad results and confusion because each market phase behaves differently and, thus, requires a different set of tools, signals and understanding. Breakout traders are pattern traders and breakout traders typically look for sideways consolidations, head and shoulders, wedges, and any other consolidation formation. The scenario below shows a wedge, which is a so-called consolidation pattern.

The characteristics of a wedge show that the previous uptrend is slowing down because the price cannot push higher as easily. A breakout trader then waits for the market to make a significant move into the opposite direction and break out of the pattern. Breakout trading is very versatile which is why it is so important to define if you want to be a trend, reversal or pullback breakout trader.

Each market phase follows its own unique rhythm and needs to be approached differently. It helps me define my trading persona even further. I want to see clear patterns with a well-defined breakout point at a market turning point. Most traders are never sure about what it is that defines them and knowing about the differences and the overlap can be helpful in determining your trading business plan.

I trade many different reversal and breakout patterns, but one is the classic Head and Shoulders. The Head and Shoulders pattern describes market turning points nicely, it provides a clear breakout point and also does not try to predict an absolute top or bottom. Fakeouts can be viewed as some type of reversals, but I personally see fakeouts as failed setups. For example, in the screenshot below the market tried to break out of the low and the high and got rejected each time.

Within the framework of my supply and demand strategy , I also trade spike fakeouts. Spike fakeouts are classic traps where the market makes a strong and sudden move and then immediately reverses into the opposite direction. The screenshot below shows two fakeouts and each case showed a well-defined consolidation first. The fakeout makes it first look like a breakout, but once the trap snaps and the price turns around, a fakeout is created. Breakouts and fakeouts can often happen in the same spot but are opposite to each other.

A trader who trades both trading styles is easily confused and jumping from signal to signal can lead to disastrous results. This is the exact reason why I said that choosing one style is the best way to go. The next screenshot shows, once again, that fakeouts usually happen quickly impulsively and are different from reversals. Especially the first left example shows one of the most profitable fakeout patterns. I consider myself a purely technical trader and do not use fundamentals to make trading decisions.

However, for the sake of completeness news ForexFactory news calendar is the best! Fundamental traders either trade the news data directly. One way to trade NFP is to look for fakeouts around the initial news release. This is a common behavior and price often spikes into one direction at the initial release, just to reverse sharply after. Thus, waiting patiently for the first move to reverse can potentially be a trading strategy worth exploring.

Alternatively, big macro traders use things like the COT report to understand how the big players are positioning themselves for long-term trends. One thing that is important to remember is that you never trade the actual news number, but how people perceive the news. Very often you can see a very bearish price reaction even though the numbers are positive.

Thus, never just rely on the news data as your only deciding factor. Generally speaking, you can usually trade any strategy on any time frame. There is no better or worse timeframe. There is no single best time frame. It only comes down to what YOU prefer, where you have your strengths and what suits your risk profile. Do you like to hold trades long and do you have a high level of patience!? Then swing-trading on the higher time frames is the best choice. News traders typically need to monitor economic calendars for key data releases.

They then watch the market closely before the event to determine key support and resistance levels so that they can react quickly after the event based on the results. News traders need to maintain strict discipline when managing their currency positions during such fast markets and often place stop-loss and take profit orders in the market. An example of an economic calendar and a data release event that a news trader might use is U. In the situation below, the previous unemployment claims number was 3,K, the expected number was 2,K, and the result was worse than expected at 2,K.

This should have put pressure on the U. Swing trading, sometimes also known as momentum trading, consists of a medium-term trading strategy that aims to capture more market moves. Swing traders do this by trading both with major trends and also against them when the market is correcting, so they should be willing to hold overnight positions.

Swing traders tend to focus on entering and existing positions based on momentum indicators that provide buy and sell signals. Traders use them to find overbought or oversold markets they can sell or buy. Swing traders might also buy ahead of support or sell before resistance levels that develop on the charts of the exchange rate for a currency pair.

Trend trading is a popular longer-term forex trading strategy that involves following the prevailing trend or directional movement in the market for a particular currency pair. This strategy often involves buying on pullbacks in up trends or selling on rallies in down trends.

After a trend trader has taken a position in the direction of the trend, you will probably hold onto it until the market reaches their objective or the trend starts reversing. Trend traders often use trailing stop loss orders to guard their profits if a significant reversal materializes. They might also use longer and shorter term moving averages and watch for crossovers to signal a potential reversal.

You can start the account opening process today and most brokers will let you open a demo account first to try their services out and trade without any risk before depositing your money. CedarFX offers access to a wide range of tradable securities, including stocks, futures, major and exotic forex pairs, cryptocurrencies and more. Though CedarFX could introduce a few additional educational resources, the broker remains a unique option for traders invested in giving back.

IG is a comprehensive forex broker that offers full access to the currency market and support for over 80 currency pairs. The broker only offers forex trading to its U. Though IG could work on its customer service and fees, the broker is an asset to new forex traders and those who prefer a more streamlined interface. With a massive range of tradable currencies, low account minimums and an impressive trading platform, FOREX. Take time to educate yourself about those facets of trading forex, too.

If you feel confident in your strategy and the broker you chose, then you can open up and fund a live account to start trading with real money. How profitable you are with forex depends on you! To make a profit through forex trading, you must know how to trade intelligently and you also need a trading strategy.

Trade with risk capital only — this is money that you can afford to lose. Regardless of what market you plan to trade, the online broker you choose is extremely important to your success. The broker you choose should be well-regulated. Put together a trading plan that lays out an appropriate position sizing method and clear risk parameters.

You can devise a trading plan and practice using it in a demo account. The most popular include scalping, day trading and position trading. The most significant are the lack of sufficient capital and over-leveraging with margin. Read More. Forex trading is an around the clock market. Benzinga provides the essential research to determine the best trading software for you in Benzinga has located the best free Forex charts for tracing the currency value changes.

Let our research help you make your investments. Discover the best forex trading tools you'll need to make the best possible trades, including calculators, converters, feeds and more. Compare the best CFD brokers to find which one is best for you.

Choose from our top six picks based on platform, security, commissions and more. Compare the best copy trade forex brokers, based on platform, ease-of-use, account minimums, network of traders and more. Ready to tackle currency pairs? Benzinga's complete forex trading guide provides simple instructions for beginning forex traders.

Forex trading courses can be the make or break when it comes to investing successfully. Read and learn from Benzinga's top training options. If you're beginning to trade, learning how to read forex charts is integral to your success. We're taking a look at the primary charts you need to know. Benzinga is your source for anything Forex, and we're detialing the best forex books to read when trading in this profitable market.

Learn more about trading forex and the 5 indicators to help you understand the forex market. Compare forex brokerages today. Compare forex brokers. Disclaimer: Please be advised that foreign currency, stock, and options trading involves a substantial risk of monetary loss.

Neither Benzinga nor its staff recommends that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. All information contained on this website is provided as general commentary for informative and entertainment purposes and does not constitute investment advice. Benzinga will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on this information, whether specifically stated in the above Terms of Service or otherwise.

Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation. CFDs and FX are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Financial engineering has created many exotic instruments with the potential of generating considerable returns. However, one should always bear in mind the high risk involved with such operations. Want to advertise with us? Send us a message. How to Trade Forex.

Is forex amazing strategy Notizie sullipo di Home Smart

Forex strategy is amazing It can also help you understand the risks of trading before making the transition to a live account. If major economic news were to hit that day, it could affect your position. Start exploring the market and test forex trading strategies using a demo trading account. You can learn more about our cookie policy hereor by following the link at the bottom of any page on our site. Hedging as part of your forex strategy can help reduce some short-term losses if you predict correctly.
Mike maloney investing in gold and silver pdf Additionally, it can involve technical indicators, which a trader will use to try and forecast future market performance. Subscribe to Finance Monthly Magazine Today to receive all of the latest news from the world of Finance. When it comes to clarifying what the best and most profitable Forex trading strategy is, there really is no single answer. Trades get triggered when the exchange rate moves beyond a given level on the chart for a currency pair and are confirmed when accompanied by an increase in volume. Learning how to trade a GBP JPY trading strategy is becoming increasingly popular due to the weekly - 1, pip moves in the currency pair. Below is an example of a simple breakout trading strategy.
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The most liquid FX currency pairs are often preferred as they contain the tightest spreads, allowing traders to enter and exit positions quickly. Some examples include:. Profit or losses are a result of any intraday price changes in the relevant currency pair.

If major economic news were to hit that day, it could affect your position. Find out more about forex day trading. Although this strategy normally means less time fixating on the market than when day trading, it does leave you at risk of any disruption overnight, or gapping. Learn more about swing trading strategies.

Position traders will hold forex positions for several weeks, months, or even years. Forex position trading is more suited for those who cannot dedicate hours each day to trading but have an acute understanding of market fundamentals. A carry trade involves borrowing from a lower interest currency pair to fund the purchase of a currency pair with a higher interest rate This strategy can be either negative or positive, depending on the pair that you are trading.

The above forex trading strategies cover general variables such as the time span a position is active, the time dedicated to researching markets and the time spent monitoring positions. This helps to distinguish when you will trade, how many positions you will open and how you will split your time between researching markets and monitoring active positions. Many forex traders believe levels that were important in the past could be important in the future.

So, if the forex pair slips back to that level again it could, therefore, signify a potential trading opportunity. Similar to analysing support levels, forex traders also analyse resistance levels. The resistance level is a point where the market turned from its previous peak and headed back down. If a market is appreciating but then suddenly falls, the overall view is likely to be that the price is getting too expensive. This forex trading strategy mirrors the bounce strategy. Such strategies, based on previous highs and lows on a chart, can make risk management relatively straightforward for any trader.

For instance, if we are looking for a bounce off a level, our stop loss can go below that previous low point. If we are looking to sell short when a market starts to falter near a previous high, then many traders will place a stop loss above that previous high. Resistance and support levels are dynamic and are prone to price breakouts in either direction.

If the price exceeds important support or resistant levels it is likely to breakout. Previously when the forex pair was up at that high, the sellers moved in and the price fell, suggesting the market had reached an overvalued level. If that old high is breached, also known as breaking resistance, then something has clearly changed. Traders are now happy to keep on buying where previously they thought the price was too expensive.

Every journey starts with a single step. When direction in the markets changes then the breakout trading strategy is often one of the early signals. Similar in function, but in the opposite direction to the breakout strategy is the breakdown strategy. This forex trading strategy is designed to jump aboard a move when a forex market slips below a previous support level.

Once again, many traders could view this as a change in sentiment towards the market. Suddenly a level where buyers were happy to buy as they viewed the market as cheap and expected it to rise — has been broken. This breakthrough of what is known as a support level can be viewed as an opportunity to short sell and try to profit from further weakness in price. It is an important example as it demonstrates that, in the real world, even the best forex trading strategies do not work all the time.

There is a false signal highlighted by the circle before the effective signal highlighted by the black arrows that saw the market really start to fall. This belongs to a family of trading tools known as oscillators — so-called because they oscillate as the markets move.

This means that it could be getting overstretched and some traders will use this as a signal to expect the market to fall back. Traders will be watching closely, expecting any weakness to run out of steam and the market to turn back up and use this as a buy signal. Seamlessly open and close trades, track your progress and set up alerts. When using any of the above forex trading strategies, it is wise to be aware of methods that you can use to adapt your forex strategy.

For example, depending on your strategy, you may wish to use the below strategies alongside other forex strategies to reduce risk exposure or to provide additional information for a forex trade. To protect oneself against an undesirable move in a currency pair, traders can hold both a long and short position simultaneously.

This offsets your exposure to the potential downside but also limits any profit. By playing both sides of the market, you can get an idea of the direction the trend is heading, so you can potentially close your position and re-enter at a better price. This is particularly useful is you suspect the market to experience some short-term volatility. Hedging as part of your forex strategy can help reduce some short-term losses if you predict correctly.

To trade forex without examining external factors like economic news or derivative indicators, you can use a forex trading strategy based on price action. This involves reading candlestick charts and using them to identify potential trading opportunities, based solely on price movements. Generally, this strategy should be used alongside another forex trading strategy like swing trading or day trading. Expecting major economic announcements?

Our forex indices are a collection of related, strategically-selected pairs, grouped into a single basket. Using the above steps, we've come up with a simple forex trading plan example below for you to see how it could potentially work. Forex trading strategies provide a basis for trading forex markets. By following a general strategy, you can help to define what type of trader you are.

By defining factors such as when you like to trade and what indicators you like to trade on, you can start to develop a forex strategy. Once you have developed a strategy you can identify patterns in the markets, and test your strategies effectiveness. This way, the forex trader is adaptable to many situations and can adapt their trading strategy to almost any forex market. What are forex trading strategies? Forex trading strategies involve analysis of the market to determine the best entry and exit points, as well as position size and trade timing.

Additionally, it can involve technical indicators, which a trader will use to try and forecast future market performance. What types of analysis are used to analyse forex markets? Forex traders can use a wide range of tools as part of their strategy to predict forex market movements, but these tools fall into the categories of technical analysis and fundamental analysis. Technical analysis involves evaluating assets based on previous market data, in an attempt to forecast market trends and reversals.

This usually comes in the format of chart patterns, technical indicators or technical studies. Fundamental analysis involves the analysis of macro trends such as country relationships and company earnings announcements. See more on the difference between technical and fundamental analysis. What are the most common styles of forex trading strategies? Some of the most common trading strategies include forex scalping , day trading, swing trading and position trading.

Which forex pairs are the most volatile? Exotic or emerging currency pairs are generally the most volatile currency pairs when trading. This is because there is less trading volume in these markets, which causes a lower level of liquidity. Volatile currency pairs offer the opportunity for quick profits, but trading these markets also comes with the risk of quick losses.

Learn more information about major, minor and exotic forex currency pairs. Disclaimer: CMC Markets is an execution-only service provider. The material whether or not it states any opinions is for general information purposes only, and does not take into account your personal circumstances or objectives. Thus, trend-following traders will have to wait patiently until a real trend is obvious.

The screenshot below shows the portion of a market move that is typically captured by trend-following traders. The red areas highlight the market turning points and the blue areas are the trend-following phases. Many amateurs make the mistake that they want to predict a new trend before it exists and enter way too early. Those traders, although they believe that they are trend traders, are actually reversal traders. Since the trend following traders need to wait until a trend has been confirmed, the question that comes up is: when is a trend confirmed?

Early trend following traders try to get into a new trend as early as possible which can result in being too early and running into a false signal. Late trend traders wait for more confirmation. It can, of course, happen that they are too late, but their signals are often stronger.

When it comes to trading tools, a trend following trader can choose from a wide variety. Many traders make the mistake and believe that this can signal a reversal which is absolutely wrong. Of course, moving averages are another popular trend following tool. Two moving averages work perfectly as a cross-over signal in the screenshot below.

Each time the moving averages cross, a new trend is initiated. The great thing about such a cross-over system is that traders automatically stay away from picking tops and bottoms because the moving averages need some time to cross.

The Ichimoku indicator is another trend following tool. It is similar to a moving average cross-over system but the premises are different. Pullbacks are a different type of trend following trading. Pullback traders look for an established trend and trade the so-called correction phases. Corrections are price movements into the direction opposite to the underlying trend. In the screenshot below, the market was in an uptrend and pullbacks corrections are the short periods where the price moved sideways or against the trend direction.

A pullback trader either waits for the price to continue into the direction of a trend or even gets into trades when the market moves lower. The danger of the second approach is that the pullback will not turn around. Not always does a market provide a pullback. The example on the left shows a market where the price just went down but never made a pullback. The second and third phase had multiple pullbacks and offered good entry opportunities for pullback traders.

As you can see already, pullback and trend following trading have a lot of overlap and trend following trader often also trade pullbacks as a natural progression. There are, of course, many different ways how pullbacks can form on your charts. In the screenshot below, there are 3 examples. Moving averages are a popular tool for pullbacks as well.

When the price is in a trending market and then comes back into the moving average, a pullback can be traded. As we will see when we talk about breakout trading, we can also trade so-called price formations as pullbacks. In the screenshot below, the price was in a clear downtrend when a head and shoulders formation formed. In such a context, the head and shoulders formation becomes a trend-following pattern and can be regarded as a pullback. The lines between pullbacks and trend-following are blurry here.

Reversals are turning points and a reversal marks the true origin of a new trend. Therefore, reversal trading can be considered very early trend following trading too. However, it is usually more effective to choose between classic trend following and reversals because each trading approach has its own unique characteristics.

The screenshot below shows a chart with different market phases and trend stages. Trend following traders will usually go for the early or mature trend. A reversal trader starts paying attention to a market once a market is entering the mature trend stage.

This usually happens once at least 2 or 3 trend waves have formed. The dangers of being a reversal trader are being too early and constantly acting in a contrarian mindset. Many failed reversal traders are trying to predict a market turn way before it happens.

When it comes to reversal tools, divergences are the classic confirmation. The RSI divergence shows exhausted trends where the trend power is fading. When a mature trend gives you an RSI divergence, a reversal can often happen. The RSI is usually a trend indicator, but when the RSI shows that a trend is losing strength, it can work very well as a reversal tool too.

I view myself as a classic reversal or very early trend-following trader too. Breakouts can happen during trend following and also during reversal trading. Breakout periods are often the link between two trending phases. A breakout describes the move away from a consolidation pattern. Consolidation patterns, as the screenshot below shows, can happen at market turning points tops and bottoms for reversals or during established trends.

The screenshot below illustrates how consolidations and breakouts are the links between two market phases. A consolidation can happen at market turning points and breakouts are then trend reversal signals. If a consolidation happens during an established trend, a breakout comes a trend following signal.

This screenshot below highlights this characteristic once again and it becomes obvious how breakouts connect the different market phases. As a trader, it is usually best to choose one specific type of breakout. Trying to trade all breakouts can lead to bad results and confusion because each market phase behaves differently and, thus, requires a different set of tools, signals and understanding.

Breakout traders are pattern traders and breakout traders typically look for sideways consolidations, head and shoulders, wedges, and any other consolidation formation. The scenario below shows a wedge, which is a so-called consolidation pattern. The characteristics of a wedge show that the previous uptrend is slowing down because the price cannot push higher as easily.

A breakout trader then waits for the market to make a significant move into the opposite direction and break out of the pattern. Breakout trading is very versatile which is why it is so important to define if you want to be a trend, reversal or pullback breakout trader.

Each market phase follows its own unique rhythm and needs to be approached differently. It helps me define my trading persona even further. I want to see clear patterns with a well-defined breakout point at a market turning point. Most traders are never sure about what it is that defines them and knowing about the differences and the overlap can be helpful in determining your trading business plan.

I trade many different reversal and breakout patterns, but one is the classic Head and Shoulders. The Head and Shoulders pattern describes market turning points nicely, it provides a clear breakout point and also does not try to predict an absolute top or bottom. Fakeouts can be viewed as some type of reversals, but I personally see fakeouts as failed setups. For example, in the screenshot below the market tried to break out of the low and the high and got rejected each time.

Within the framework of my supply and demand strategy , I also trade spike fakeouts. Spike fakeouts are classic traps where the market makes a strong and sudden move and then immediately reverses into the opposite direction. The screenshot below shows two fakeouts and each case showed a well-defined consolidation first. The fakeout makes it first look like a breakout, but once the trap snaps and the price turns around, a fakeout is created.

Breakouts and fakeouts can often happen in the same spot but are opposite to each other. A trader who trades both trading styles is easily confused and jumping from signal to signal can lead to disastrous results.

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