Forex: what are the reversal points for?

The presence of turning points on Forex is a very important circumstance that forex speculator can use for his own purposes - for profit making.

The reversal point is the price (price level), having reached which the currency rate, moving in a certain trend (ascending or descending), is inclined to one of the following possible scenarios of its further behavior:

• - slowing down the trend, which is unambiguously confirmed by the data of the "candle" and "indicator" analysis;
• - the entry of the market "in flat", that is, the movement of the course in a limited, very narrow "corridor" without a clearly expressed vector;
• - the market reversal and its movement in the opposite direction to the trend, which can mean both an obvious trend correction and a relatively short "rollback" with the possibility of resuming the course on the previously operating trend to the same pivot point (then a similar scenario can be repeated).

Most often, a characteristic symptom of the stay of the exchange rate in the immediate vicinity of the turning point can be considered its oscillatory movement in an extremely narrow range. This kind of limited exchange rate fluctuations can usually be observed within the limits of certain price marks, which can be identified as possible turning points, read more about them on the online forex news.

The existence of the phenomenon of turning points is due to the presence of the market certain memory. Let's assume that in the past there were some events that affected the market in such a way that it was forced to stop its movement in a specific direction, changing it to the opposite direction or going "in flat". Subsequently, these "incidents" will be associated with the "trend" market with certain price levels that were reached by them at the very moment when such "incidents" occurred. In other words, the market will have a kind of "psychological binding" to certain price marks, at which achievement its "trend" movement will lose its former confidence.

Reaching any turning point, the market as it faces a choice: either once again succumb to the "complexes" of the past, or still overcome this "psychological barrier" and continue to move on the trend. As a rule, the market can make a "breakthrough" of the reversal point in two situations:

• - after a certain time, the turning point ceased to have psychological power over the market, that is, it became simply irrelevant;
• - in the market there were new events that motivated him to overcome the fear associated with a particular turning point.

The trader's task is to timely identify on the market reversal points in order to make adequate trading decisions. For this, a variety of methods can be used: graphical analysis (identification of zones of "price stagnation"), signals of mathematical indicators and so on.