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Indicators of the trend reversal

Indicators of the trend reversal

Every trader wants to enter the market close to the point of reversal because is an obligatory condition for beneficial trading on any asset. Maintaining the position as long as necessary toward the main trend and reaching the opposite peak is a hard but achievable task. The most important thing is to utilize the accurate indicators of the reversal and exact binary options strategy.


How to identify the trend


The main problem of any strategy is not the models and trading indicators, it is human psychology. Every trader has a personal vision of the market situation: when a trend starts or ends or when there is a reversal and not the price correction. Examining how signals work for binary option, that any forecast is carried out on historical details, which means that delay is unavoidable.


Let's take into account the trend of directional price movements, which have a statistical value on the timeframe.


In other words, 2-3 candlesticks in one direction the size of 10-15 points for scalping on the M1-M5 is an obvious trend, for medium-term trading needs strong movement during several hours. Every reversal indicator has its delay value and the methods to work with it are different for every situation.


Why takes a swing price


As market psychology states, a reversal of the price movement shows a change in the balance between bulls and bears. Important fundamental news and statistics can change the trend. The main task of these indicators is to find this trend reversal. 


Three stages of market reversal:


1. Rollbacks and breakdowns are coming close to the important price zones and levels. This may be a line of expiration, support, resistance, maximum and minimum, or the boundary of the channel;  

2. The price should be fixed above or below a certain level. It would be better if this happens after several (at least two) retests;

3. Two previous points are completed, and there is a strong movement against the previous tendency. 


After the first turn, the binary option trader should assess how large the possible consolidation could be, until the balance of powers on the market changes. After its completion, you need to open a new one or fix the result of the current deal.

 

What is the reversal? It is a sufficiently "wide" trend, not less than 20-30% of the standard volatility over the past 7-10 days. If the percentage is smaller, it is just a local rollback or correction that will end very fast.





Remember, that there is no technical indicator that could provide an exact guarantee of the reliability of the signal. However, if the opposite movement is very long and strong, the credibility of the new movement will be high
 

We need to monitor market volumes because when the new movement appears, they will increase. It is far better to look at non-tick (real) volumes on futures and options. The small and medium-sized traders should follow the market makers or the market will quickly return to the fleet or to the previous movement. 
 

The main purpose of reversal indicators:
 
  • Provide the information only about the significant corrections and pullbacks;
  • Give a minimal delay to the trader.
 
Regardless of the parameters and methods of calculation, the principal task of all reversal binary option signals is to show the end of the current trend.

 
Basic Trend Indicators


The most well-known instrument of technical analysis is the Moving Average (MA). This indicator allows us to predict the future movement of the price basing its position near the indicator line: lower for sales (SELL), higher for purchases (BUY). A probable reversal is situated on the breakdown.

During the creation of the binary option strategy, you should remember that the average value displays only the clear strong trend. Beneficial intraday and short-term deals show up on short impulses. That’s why it is better to apply the following method: use MA with a lot of periods ("long" Moving Average) for general analysis and "short" to filter the signals.

If you want to compensate for the delay, use the several averages with different offsets and time periods, for example, in the standard Alligator of Bill Williams, which stay efficient on any asset.