moonchild
VIP Contributor
In Forex Trading, there are different types of reversal when a price is moving, some reversal can go all the way down to the support or go back to your entry and even hit your stop loss without turning back to the initial move you catch.
When price is in motion it is never linear and what this means is it can never just keep on going up or down continously, there's always a Retracement and then an Impulsive move and then a Retracement and that's how it goes.
Understanding this is very important because you would be mindful of this moves and know when a move is either reversal or retracement.
Retracement in simple terms occurs when there is an impulsive move whether upwards or downwards, it is also a correction move, but what actually makes it a retracement is doesn't retrace lower than the impulsive move, it just drops for a moment and then continue making impulsive move.
Reversal is also similar with retracement but in reversal there's a break of structure and the move will pass the impulsive move and keeps on going down or up depending on the trend, this is a good time to exit a trade or adjust your stop loss.
When price is in motion it is never linear and what this means is it can never just keep on going up or down continously, there's always a Retracement and then an Impulsive move and then a Retracement and that's how it goes.
Understanding this is very important because you would be mindful of this moves and know when a move is either reversal or retracement.
Retracement in simple terms occurs when there is an impulsive move whether upwards or downwards, it is also a correction move, but what actually makes it a retracement is doesn't retrace lower than the impulsive move, it just drops for a moment and then continue making impulsive move.
Reversal is also similar with retracement but in reversal there's a break of structure and the move will pass the impulsive move and keeps on going down or up depending on the trend, this is a good time to exit a trade or adjust your stop loss.