As a trader, you probably test different strategies and methods to catch tops and bottoms. As a rule, it results in emphasizing on candlestick patterns that come as the baseline part of the technical analysis or price actions. Fibonacci retracements or Support and Resistance are a good example of such indicators.
However, it appears that most traders have the backs against the wall when stuck in cluttered charts. This is where trend reversal indicators may provide the desired support. They can help to benefit from profitable trading on a daily basis.
Introduction to the Trend Reversal Indicator
Some traders believe that different indicators are the only tools needed to measure the Forex market. However, those tools might not be enough in most cases. That is the reason why dedicated experts opt for the trend reversal indicator not to follow the trend direction but to measure probabilities of price and market reversals at a specific spot.
In other words, the instrument makes it possible to track when the trend starts moving in the reverse direction. Not only it may help to define the best market entry or exit, but also detect the most favorable trading conditions using trend reversal indicators.
What's more, understanding the best trend reversal indicator will let you initiate a new trade with minimum risk. All you need is to consider several baseline types that apply to this category. They include:
- Trend Lines;
- Moving Average;
- Swing Pivots;
- Fibonacci and some others.
If you do not face difficulties in trading the above-mentioned, you will be able to avoid losses when using them along with the Forex best indicator for a trend reversal.
Its main mission is to provide clear buy and sell signals depicted on the MT4 Forex currency chart. Besides, it can be used for trading other assets when you might need to stay in touch with the trend's rapid changes.
The instrument is not as easy to read, as it may seem. The key challenge here is that you need to understand several indicators simultaneously as well as learn how to read them on the same chart.
It's a good idea to test these indicators without any risk to your trading on a free demo account. It's just like real, but profits and losses are virtual. Real market conditions available now. Try!
How Can Best Trend Reversal Indicator Help?
First of all, it makes it possible for traders to locate the swing high in the uptrend. Secondly, you will be able to find a low swing within the downtrend. If you succeed, you will define points at which the market is supposed to reverse.
*Swing High (SH): a price bar high preceded by two lower highs (LH) and followed by two lower highs (LH)
To make things even simpler, you may consider those points as the best market entry or exit positions. This is why we have stated earlier that the trend reverse indicators do not mainly refer to the trend movement although they still show it. The idea here is to try and catch the maximum price swing.
Here is how it works: a trend reversal indicator spots the crossover of two modified moving averages. They are generally displayed in a separate window. Some traders also know those moving averages under the MKNC4 abbreviation. You need to take into account two major conditions:
- Fast MKNC4 refers to the blue level.
- The red color is associated with a slow level of MKNC4.
When the two moving averages form a crossover also known as bullish (with a fast MKNC4 beyond the slow one), they create a buying signal. When the opposite situation occurs, the moving averages create a bearish crossover with a signal to sell.
How to Read Trend Reversal Indicators
Interpreting the trend reversal indicator is not as complex as it seems. As a trader, you need to take into account three general signals that may occur:
- Buy Signal – if you see the blue dots going above the red ones, you may like to place a long trade.
- Sell Signal – when red dots move above the blue ones, it's a signal to go short and sell the asset.
- Exit Trade – once you have witnessed an opposite signal taking place within a short period, it's a moment to close an open trade.
A good idea is to use the indicator along with other tools and combine them with technical analysis. But as it was stated earlier, the indicators alone will not help you measure the Forex market. You will need a system along with various approaches not just to retrieve signals but also to confirm them. It will ensure minimum losses and risk-free trading.
How to Add Indicators to MT4 (WebTrader) Without Installation
You can follow these simple steps or watch the video below:
- Open a free Demo account if you don't have one or log in to existing one via WebTrader.
- The WebTrader will launch automatically. If not, login with demo credentials.
- Go to Insert -> Indicators and choose any indicator you need or a few. The video also has info on how to delete an indicator you don't need.
This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.