In today forex faq, we have a question from one of our fellow traders asking for indicators that can help in identifying turning points.
Below is the question:
What are some indicators to help identify turning points and how to use them?
In fact, if you have read my blog, you will have seen one of my blog post on forex reversal indicators.
In that post, I talk about 2 indicators that can help to tell a reversal in action as well as 2 reversal candlestick patterns that can give you more assurance of a reversal.
Therefore I will like to use this post to further elaborate on this topic of reversal.
Usually I will use a combination of both reversal candlestick patterns, CCI and MACD indicator to tell a reversal. With this combination, it will give me a higher probability of being right.
The key to trading is probability, what we need as a trader is to find ways to increase our probability of winning which is through the use of indicators and candlestick patterns.
MACD Indicator – When using the MACD indicator, you will stick to its default setting. What you are looking for is the histogram which is the bar in the indicator.
When it flips down, it is a sign that the price is moving down. When it flips up, it is a sign that the price is moving up.
CCI Indicator – You will need to be alert of the 200 and -200 level as these are places where the price will reverse.
However there are also chances that the price is simply doing a retracement and not a reversal. Therefore I will usually make use of reversal candlestick patterns like
- Railway Track
- Shooting Star
- Hammer/Inverted Hammer
to further identify whether it is a reversal or retracement.
If you have the above 2 indicators pointing to a reversal but there is no reversal candlestick patterns formation, it is usually a retracement.
If you have the above 2 indicators pointing to a reversal plus there is a reversal candlestick patterns, it is most probably a reversal.
I hope that I have answered your question and for those of you who is reading this post and have anything to add, do feel free to give your comments below.