HFM information and reviews
HFM
96%
FXCC information and reviews
FXCC
92%
FxPro information and reviews
FxPro
89%
FBS information and reviews
FBS
88%
XM information and reviews
XM
86%
NordFX information and reviews
NordFX
86%

Market Hiccup or Potential Loss


Forecasting, predicting or even analyzing the market can be a challenging feat that involves mathematics, algorithms, news, awareness of geopolitical happenings and some say a bit of serendipity. Beyond these intrinsic obstacles there is always a higher than normal risk involved when you are inexperienced and unable to interpret such analysis.

An important part of these market “investigations” deal with trends and price actions, some negative and some positive. This article will focus primarily on the price actions of retracement and reversal. Specifically speaking about the their difference and which of the two is more important for you – the trader – to recognize early.

What is a Retracement

What is a Retracement

Signs of a Retracement

Signs of a Retracement

The Importance of a Retracements Scope

The Importance of a Retracements Scope

After you have determined that a Retracement is in fact not a complete price reversal – the next step is identifying the retracements type which usually is broken down three ways:

Fibonacci Retracements

Mainly used for the Foreign Exchange Market this retracement, but this is also occasionally used by stock traders and analyst. Usually an automated tool within charting software (like MT4) that allows you to draw a line between two points of a price’s most recent impulse wave.

Pivot Points Support and Resistance

These levels are generally used to gauge a retracement’s scope – a trader will look at the lowest support levels and if the price drops below it might be signs of a full-blown reversal.

Trendline Supports

This is probably the most obvious sign of a retracement vs. a full reversal is the price crossing a major trendline. Of this means that the trends break on a high volume but generally these are used by traders to distinguish reversals or retracements. 

Using Stop Loss During Retracements

Using Stop Loss During Retracements

The primary danger with retracements is that they can turn into full blown reversals putting your capital at risk for loss. Using stop - loss could potentially lower the risk significantly – to do so set your stop-loss levels just below the retracement levels you extrapolate from technical analysis or directly below the support trendline over the long-term.

The most sure-fire way to minimize risk to capital is to of course exit a trade at the sign of retracement before or if it becomes a reversal. At the same time exiting a trade too soon can also hurt your investment due to the loss of earning opportunity – thus another element plays into recognizing a retracement and avoiding the loss due to a sudden reversal: discipline.

Hopefully with the information you received in this article you will be able to trade with more knowledge – if you want explore the markets and watch the prices of currencies, commodities and more start trading with and STO account today to gain access to competitive spreads and the MT4 platform.

This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice

#source


RELATED

Position Sizing Using the Risk Reward Ratio

Position sizing involves making an objective decision about...

A Complete Guide to Online Indices Trading

An increasing number of traders is interested in indices markets and CFD trading. Indices measure how a group of stocks performs. The idea is to focus on how strong...

Cryptocurrency Market: How to Choose the Best Platform

Do you have an interest in the cryptocurrency market? Do you want to start trading? Are you unsure of what cryptocurrency trading entails? Do you know how the market...

How to Assess PAMM Account

PAMM Account Monitoring Service provides an extensive overview of tools for analyzing the work of managers. In general, all monitoring...

What Factors Influence Electroneum Price?

With the cryptocurrency market being on the rise for the past three years, more and more investors are considering going for digital assets instead of traditional ones...

What Is A Crypto Airdrop And How Does It Work?

You might have heard about crypto token airdrops as a popular way to get free cryptocurrency with little to no effort involved. In most cases, the offer of something free...

Unlocking the Potential of Asset-Backed Cryptocurrencies: An In-Depth Exploration

Imagine blending age-old investment wisdom with the groundbreaking digital currency sphere. The infusion of the US dollar into blockchain technology, or endowing cryptocurrencies...

What is Equity Trading?

Trading on equity refers to the buying and selling of stocks or corporate shares, usually referred to as equities, on the financial market. Investing in shares may be done in a few different ways...

APR vs. APY in Crypto: A Comprehensive Guide

Cryptocurrency investments have become increasingly popular in recent years, attracting investors from all walks of life. As the crypto market continues to grow and evolve...

MetaTrader 4 vs MetaTrader 5: Which is Better in 2022?

MetaTrader 4 (MT4) and MetaTrader 5 (MT5) are the world’s most popular trading platforms, developed by MetaQuotes Software Corp. Millions of traders all over the world...

What is Decentralized Finance, or DeFi?

Decentralized finance, or DeFi, is similar to but not identical to Bitcoin (BTC). The term "DeFi" refers to financial systems enabled by decentralized blockchain technology. DeFi is mostly linked to the Ethereum (ETH) blockchain...

The Art of Trading Forex With Stop Loss (Or Without It)

One can't overstate the importance of mastering the art of stop loss placement when trading Forex or any other financial market for that matter. Stop loss is an...

Cardano: What Price Will the Peer-Reviewed Crypto Reach?

Cardano was late to the crypto market compared to many others, but the altcoin crypto asset is brimming with innovation, giving it incredible projected...

Trading opportunities during the football world championship

The world football championship is fast approaching. Fans around the world are already thinking about how to best spend their time during this event, and soon...

The Measurements to Take When Investing in Ethereum

Ethereum is among the top 10 digital currencies on the cryptocurrency market, according to market cap. As of April 2019, the market price of Ethereum was $152 per unit...

Banking Forex: advantages and disadvantages

Without exaggeration, currency pairs can be called the most popular financial instrument. The instability of the exchange rate, combined with the high threshold of credit...

What is an Index Fund? A Definitive Guide

When faced with volatility in the financial markets, your first defence against the inevitable is having a well-balanced and diversified portfolio. Diversification of your portfolio can be done in many ways...

Fundamental Analysis

Company fundamentals, such as the amount of money the companies earns and how efficiently they utilise their resources, drive the share and CFD markets...

NFTs vs. cryptocurrency vs. digital currency: What’s the difference?

Non-fungible tokens, or NFTs, are rapidly evolving digital assets that can represent real, authentic items and can be in the form of music, fashion, art, sports and more...

Ten Tips to becoming a Forex Trader

Getting started in forex has never been simpler. Easier access to currency markets and brokerage platforms that fit a range of trading needs has become widely prevalent...

Vantage information and reviews
Vantage
85%
FP Markets information and reviews
FP Markets
81%
IronFX information and reviews
IronFX
77%
T4Trade information and reviews
T4Trade
76%
Exness information and reviews
Exness
76%
Just2Trade information and reviews
Just2Trade
76%

© 2006-2025 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.