How to capture trend changes? Four efficient tips for trading turn analysis

In the trading field, subtle changes in trends often indicate major changes in the direction of the market, which is a crucial signal for traders. It may not only reveal new trading opportunities, but it may also suggest potential risks, forcing us to reevaluate and adjust our strategy. Therefore, EagleTrader has compiled a series of turning analysis methods, hoping to help traders accurately capture the latest trends in the market.

Turning toward analysis plays an important role in Forex trading, enabling traders to identify potential turning points in market trends and thus make smarter trading decisions. Through in-depth understanding and application of turnaround analysis, traders can more effectively grasp market opportunities and avoid missing profit opportunities or suffering unnecessary losses when the trend reverses.

Turning analysis method

1. Form analysis:

• Mono analysis is one of the basic methods in foreign exchange turn analysis. It predicts the change in market trends by observing the shape of price trends, such as head and shoulders top, double bottom, triangle, etc. These patterns usually appear at the end of a market trend, indicating an imminent reversal in the market.

• Reversal patterns such as head and shoulders tops, double tops, etc. usually mean the end of the market trend and the beginning of the reversal. Organizing patterns such as triangles, flags, etc. may indicate the market’s temporary rest in the current trend, and may continue to develop or reverse along the original trend.

2. Technical indicator analysis:

• Technical indicators are mathematical formulas calculated based on price and/or trading volume, used to quantify specific aspects of the market, such as momentum, volatility, overbought or oversold state, etc. Commonly used technical indicators include the relative strength index (RSI), stochastic indicators (KD indicator), smooth similarity and similarity average (MACD), etc. These indicators also play an important role in steering analysis because they can provide additional signals for market trend changes. For example, when the RSI indicator exceeds 70 or below 30, it may indicate that the market has entered an overbought or oversold state, indicating that the market is about to reverse.

3. Trendline analysis:

• Trendlines are straight lines connecting highs or lows of prices to identify major trends in the market. In turn analysis, a breakout of a trend line is often regarded as a signal of a trend reversal.

• When the price breaks through the uptrend line, it may indicate that the market will turn into a downtrend; similarly, when the price breaks through the downtrend line, it may indicate that the market will turn into an uptrend.

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4. Trading volume analysis:

• Trading volume is an indicator for measuring market activity, and it also plays an important role in steering analysis.

• Trading volume usually increases significantly near the reversal point of the market trend. This is because traders usually participate more actively in trading when the market is about to reversal. Therefore, observing changes in trading volume can help traders better identify the shift in market trends.

Trading analysis practical application

Identifying market trends:

Identifying market trends:

First, traders need to clarify whether the current market trend is an upward trend, a downward trend or a horizontal consolidation. This can be done by observing price trends, drawing trend lines, and analyzing technical indicators.

Find reversal signals:

After identifying the market trend, traders need to look for potential reversal signals. These signals may appear in the form of the price trend, technical indicators, or changes in trading volume.

Confirm reversal: 2em”>When a potential reversal signal is found, the trader needs to further confirm whether the reversal is true. This usually needs to be accomplished by observing the subsequent development of the price trend, verifying the effectiveness of technical indicators, and analyzing changes in trading volume.