How to determine the turning point of a market trend reversal in foreign exchange trading?

When foreign exchange investors trade foreign exchange gold, judging the direction and inflection point of the trend is an important factor in determining the trading performance. However, many foreign exchange gold traders still have difficulty mastering the method of judging the inflection point position, which leads to a certain degree of loss or dissatisfaction with the profit result.

In fact, foreign exchange transactions only need to remember three points to determine the turning point of the trend.

There are three types of divergence that can be used to determine the inflection point of a trend:

The first way is to compare the last falling (rising) angle of foreign exchange trading with the last falling (rising) angle.

Angles represent speed and efficiency. If the angle slows down, it indicates a deviation in efficiency. This deviation is based on the decrease in the efficiency of the forces maintaining the original trend, and the internal forces of the original trend have changed unfavorably to maintain the original trend.

The second way is to compare the magnitude of the recent decline (rise) in foreign exchange transactions with the magnitude of the previous decline (rise).

Amplitude represents overall strength, represents effect, and represents endurance. If the amplitude is reduced, it indicates a deviation in overall size (strength) due to a decrease in endurance to maintain the original trend, and overall strength is exhausted.

The third way is to compare the angle and magnitude of the latest rebound (pullback) with the angle and magnitude of the last foreign exchange rebound (pullback).

If the amplitude is the same, but the angle increases; or if the angle is equal, but the amplitude increases, or both the amplitude and the angle increase, it indicates that the counter-trend force is strengthening, and an inflection point may be formed, and action can be taken after falling or rising again.

This is another form of divergence, a divergence of counter-trend forces. It can be called an anti-divergence. Of course it is better to compare the angle and magnitude of another decline (rise) with the last decline (rise), but an anti-divergence can be predicted in advance and a possible divergence.

Important factors affecting trend turning points

1. Periodic issues

Periodic problems exist in every market. For example, the central bank interest cycle has an important impact on the asset market. If investors master its interest cycle, there will be great profit opportunities in the asset market. There are also cycles in the foreign exchange market. Changes in US real interest rates are one of the factors that affect the dollar cycle.

2. The market itself is a tool for digesting expectations

For example, let me explain to you that the market expects a new cycle to begin after the US interest rate hike cycle has passed, and the factors affecting the market will not be known until then. In the foreign exchange market, foreign exchange speculators generally regard sudden political events as a cycle of speculation. The top priority for foreign exchange speculators is to find the cycle changes and how to adopt the correct investment strategy during this cycle.

3. Fundamental changes

The fundamental analysis of foreign exchange is based on factors such as the development of a country's macroeconomy, asset markets, and politics, as well as other factors that may affect the analysis of currency prices, in order to achieve the purpose of judging the direction of the market.

Macroeconomics includes: monetary policy, interest rates, GDP, inflation rate, unemployment rate, etc. Asset markets include: stocks, bonds, real estate, etc.

Political factors include geopolitical events, wars, terrorist attacks, natural disasters, and diplomatic events.

4. Technological changes

foreign exchange marketThe technical analysis is the research object of market behavior, predicting the future trend of market price changes, and the study of market behavior by charts. Technical analysis shows that market behavior includes the digestion of everything. All potential events, economic events, social events, wars, natural disasters, etc., are reflected in price changes.

The judgment of foreign exchange trading trends is very important for the choice of investment direction. If the trend choice is correct, then the profit is certain, but if the choice is wrong, then the only thing waiting for us is loss. For many investors who are just starting to enter the foreign exchange market, it is indeed very difficult to accurately judge the inflection point. This skill can only be obtained through constant and slow exploration in foreign exchange trading practice.