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Trend reversal indicators for binary options, proven algorithms. Accurate indicator of trend reversal without redrawing, download Forex indicators that determine trend reversal

About 80% of Forex traders suffer losses due to mistakes they made when making decisions. The lack of financial analysis tools or the knowledge necessary to interpret its results affects the rationality of their actions. Moreover, a wide variety of technical tools can confuse a novice investor.

Technical Analysis Tools

Effective data analysis tools, including trend change indicators, will help you understand market dynamics. Their purpose is to reflect the trend in the dynamics of foreign exchange market rates. A trend indicator can indicate its direction (upward, downward and sideways), strength and reversal. The following indices are distinguished:

  • the moment or rate of change of the exchange rate of the previous period to the rate of the current one;
  • volatility or exchange rate variability;
  • trading volume;
  • support and resistance.

Trend indices

The best trend indicators are:

  • moving averages (MA), simple SMA, exponential EMA and weighted WMA;
  • moving average convergence/divergence MACD
  • TRIX (English triple EMA, triple EMA);
  • directional movement (DX);
  • average DX (ADX);
  • commodity channel (CCI);
  • parabolic SAR (English and reversal);
  • SMI (English: smart money index);
  • vortex (Vortex indicator, VI);
  • Ichimoku trend indicator.

Trend indices help you trade in its direction by staying long in uptrends and short in downtrends. The disadvantage of these indicators is the delay in the moment of market trend reversal.

Torque indices

You can avoid delays using torque indicators. They help establish the rate reversal near the lower or upper boundaries of the horizontal trend channel, the moments of resale and repurchase. The disadvantage of momentum indicators is the premature signaling of selling in a rising trend and buying in a falling trend. These include indicators:

  • stochastic;
  • force (eng. force index, FI);
  • true strength index (TSI);
  • relative strength
  • ultimate oscillator (UOS);
  • money flow index (MFI);
  • Williams percentage range (Williams %R, %R).

There are also psychological Forex indices: bullish consensus, commitment index (COT), which assess the general situation in the market, its tendency to fall or rise in prices.

Trend and momentum indices often do not coincide in forecasts. For example, with long-term growth in the exchange rate, the trend direction indicator rises, signaling a buy. At the same time, momentum oscillators give a signal of overbuying, suggesting to sell. The opposite situation is observed during a period of prolonged price decline, when the trend direction indicator drops, signaling a sell. At the same time, indicators of the rate of price change insist on buying.

Trend strength indicator

The strength of a growing trend can be assessed by its volume, direction and distance. When the closing rate is higher than the previous one, the trend strength is positive. And vice versa. The more the exchange rate has changed, the stronger the trend. The trend strength indicator is calculated by multiplying the difference between the last and previous closing prices by the volume of the currency. Thus, a strengthening trend is determined by an increase in price or trading volume. Changes from -100% to 100%.

RSI indicator

The RSI relative strength indicator is calculated as the ratio of the moving average of positive changes in the closing rate for a period to the sum of the moving averages of positive and negative changes in the same price, multiplied by 100. When the index value approaches 100%, the indicator signals that the currency is overbought, and when the index value approaches 0%, the indicator signals that the currency is overbought, and when the index value approaches 100%, the indicator signals that the currency is overbought, and when the index value approaches 0%, it signals that the currency is overbought. about its oversale. The extreme of the index chart, opposite to the direction of price movement, is an indicator of a trend reversal. Conversely, if during an upward trend the price chart shows a new high, but the index does not change, then a reversal in the opposite direction is expected. To determine trend changes, you can apply technical analysis figures to the indicator chart. Also, a signal of a trend reversal is the convergence and divergence of the indicator chart and the price - the price follows in the direction of the relative strength index.

For example, a trader enters a long position if the MA50 exceeds the MA200 and the 3-day RSI falls below the set point of 20%, signaling oversold conditions. Conversely, a trader enters a short position if MA50 is below MA200 and RSI3 rises above the target level of 80%, signaling that the currency is overbought.

MACD indicator

The MACD trend indicator is based on the difference between exponential moving averages of a shorter and longer period. Typically 12 and 26 day moving averages are used. MA intersections are used to judge changes in the trend of different time periods, and by distance and relative position, the stability of an upward or downward trend is judged. Subtracting from the short-term moving average the long-term one gives an oscillator that clearly takes into account these features. The indicator is a type of analysis of two averages.

There is a histogram and linear MACD indicator.

The MACD histogram indicator is calculated using the formula: MACD = EMA 9 [A], where A = EMA 12 [i] - EMA 26 [i], where i is the price.

  • the passage of the maximum or minimum MACD is a signal that should be responded to when receiving several additional ones;
  • MACD crossing the established border is the basis for opening a position;
  • crossing the MACD midpoint also requires additional signals.

Signals that confirm MACD histogram signals are volume indicators. It is also advised to wait for the exchange rate to change in the direction of the forecast.

Linear MACD consists of smoothed and unsmoothed A. These lines repeat the dynamics of the exchange rate.

The intersection of the 12-day line and the 26-day line from top to bottom signals a sell, and from bottom to top - a buy.

The value following the low or high of the 12-day line is a warning that requires confirmation by a cross of the MACD lines.

The intersection of the linear MACD with the value boundaries requires at least 2 confirmation signals.

The indicator should be used on charts no smaller than daily ones. May be significantly delayed.

Parabolic SAR

Parabolic SAR, when the rate, when the market trend changes, enters a new extreme, changes the MA of the stop boundaries to short-term (from 50 to 5 days), and the stop and reversal rate converges with the trend. The indicator repeats the trend until it crosses with closing the current position and opening the opposite one.

The initial rate is equal to the previous minimum (maximum) rate. The SAR is then calculated as follows: SAR n+1 = SARp + AF(M - SAR n), where:

  • SAR n+1 is the stop price of the open position,
  • SAR n is the SAR of the previous period,
  • AF - acceleration, increasing from 0.02 to 0.02 when the course reaches the value M.
  • M - new maximum (minimum) rate.

The parabolic system is used both to determine the moment to close a position and to open positions.

Commodity channel indicator

The commodity channel indicator is an indicator of price momentum and is calculated as the quotient of the difference between the price and its moving average from the absolute price deviation, multiplied by the reduction factor.

CCI = (P n - SMA(P n)) / 0.015D, where:

  • P n - typical price;
  • SMA(P n) - moving average of a typical price;
  • D is the average of the absolute difference between the average rate and its SMA.

CCI values ​​range from +/-100. Moreover, exceeding 100 indicates that the currency is overbought, and -100 indicates that it is oversold, and this is an indicator of a trend reversal.

It is generally accepted that going beyond 100 is not accidental and creates an opportunity for a transaction. You should buy when the CCI exceeds 100, and sell when the index drops below 100. It is recommended to open a short position when the CCI index values ​​are less than -100 and close - above -100.

MA indicators

Moving averages are simple, weighted and exponential.

Simple MA corresponds to the arithmetic average of the exchange rate for the period.

This is the simplest and most popular indicator showing the trend. For example, the 200-day SMA has remained a popular and effective tool for analyzing Forex quotes for decades. It is calculated by summing the closing rates over the past 200-day period and dividing by the number of days. Analysts simplified the calculation by adding up the closing rates of 40 weeks and dividing the result by 40.

To calculate the next MA value, you need to subtract the closing rate 40 weeks ago, add the latest closing rate and divide by 40.

The intersection of MA lines of different periodicities allows you to calculate the moment of trend reversal. For example, the intersection point of SMA9 and SMA14 signals a change in trend.

The disadvantage of the method is the constant delay of signals, but its advantage is its simplicity and the ability to use SAM lines as resistance and support lines.

WMA Index

Weighted moving averages give each exchange rate a weight that decreases with distance from the current day:

WMA = 2∑(n-i)P t-i / (n(n+1)), where:

  • P t-i - exchange rate value at a moment removed by i intervals from the current one;
  • n - number of intervals.

Giving later courses more weight is believed to be more informative than SMA. For long periods, SMA is used, and for short periods (no more than an hour) - WMA or EMA.

EMA index

The exponential average is also calculated by assigning weights to courses, taking into account all rates of the previous period:

EMA t = EMA t-1 + (K [ Pt - EMA t-1 ]), where:

  • K = 2 / (n+1), where n is the period of the average.

This smoothes out the moving average curve relative to the exchange rates.

MA reacts to 1 exchange rate change twice - when a value is received and when a value is lost. EMA reacts once when receiving a rate, which makes the indicator more preferable. EMA also allows you to open positions on time.

When analyzing, you should find the intersections of the average and the exchange rate chart, find points after the maximum or minimum of the average, the maximum divergence between the MA and the price. And also monitor the direction of the MA indicator, which indicates the direction of the trend.

Stochastic Oscillator

The stochastic oscillator is an indicator of the rate of price change. It is calculated by the ratio of the difference between the current closing price Pt and the minimum price Ln for period n to the difference between the maximum Hn and the minimum price of the period Ln, multiplied by 100%:

- %K=100(P t -L n)/(H n -L n).

The three-day moving average of the three most recent %K values ​​is calculated as follows:

- %D=100((K 1 +K 2 +K 3)/3).

In addition to the simple average, both exponential and weighted averages can be used.

When old data is discarded, the indicator may change abruptly, which leads to instability and erroneous signals. Therefore, if an accurate trend indicator is required, then this oscillator is not the best choice.

If %K and the exchange rate diverge, a trend reversal is expected. If the rate reaches another high without the %K high, then we can expect that the downward trend will replace the uptrend. Conversely, if the rate reaches a minimum, but %K does not, then we must expect a reversal of the rate trend upward.

A buy signal is when %K rises above %D, and a sell signal is when %K falls below %D. According to the developer, the signal is more reliable if %D has already turned in the direction of the new trend before crossing %K. The most reliable are buy signals in the 10-15% area and sell signals in the 85-90% area.

Trend reversal indicator without redrawing

Algorithms for calculating indicators use historical data. Each new price deletes the first price of the billing period. Even the best trend indicators, recalculating values ​​based on new history, can change their previous values. This change in values ​​when new data arrives is called redrawing the indicator.

This effect is observed in most Forex indices, so to reduce the impact of such changes, a trend reversal indicator without redrawing is needed.

The absence of redrawing should always be checked independently due to the fact that the expression “lack of redrawing” has gained popularity and is used without sufficient grounds by developers of free and paid indicators to advertise their products.

You can check for the absence of redrawing visually in two ways:

  • monitoring the indicator on a small timeframe;
  • use on timeframes M30 and higher to speed up the trading platform testing software procedure, which can speed up the indicator tracking time.

The trend reversal indicator without redrawing is an interesting and profitable tool for technical analysis, but you need to take into account that redrawing is not always a disadvantage. It becomes a consequence of a change in the market situation, and the “lost” signal could be false.

Williams' fractals are an example of how redrawing can be useful. When the indicator appears, you should wait for its confirmation: if the fractal includes 5 candles, then it is recommended to open a trade if it does not redraw during the next two candles. And a trend indicator without redrawing will deprive the trader of such a tool, or, instilling in him a false sense of reliability, will lead to losses.

As you know, the most profitable strategies involve trading in the direction of the trend, but in order to determine the market mood with a high degree of reliability on a clean chart, you will need good knowledge of the trading instrument. Therefore, it has become widespread reversal indicators, allowing using mathematical calculations to determine the moment of completion of the previous trend. Several similar algorithms will be discussed in today's article.

Let's start, perhaps, with standard reversal indicators, since often even experienced traders do not know all the possible ways to use long-familiar formulas. And the first of them is the good old RSI (full description of the RSI indicator).

In almost every textbook and training manual, the relative strength index is considered as an indicator of a trend reversal, and the signal is when the indicator line reaches the overbought or oversold boundary. The figure below shows an example of such a recommendation:


I would like to believe that all the problems that arise when using reversal indicators on Forex are only a consequence of market volatility, but such examples suggest that theoretic teachers who retell the same thing year after year do not look at the chart. Look at the illustration above, where the RSI on the daily timeframe, as recommended by the classics, produced two completely inadequate signals.

One could argue that it is designed to search for corrections, and another trend indicator is needed for confirmation. If so, then you can hang 10 more indicators just to be sure. In fact, the error here is of a “fundamental” nature (not to be confused with the type of analysis). In practice, RSI produces high-quality signals only from the midline, i.e. upon reaching the equilibrium point of 50%.


If we take this circumstance into account, then to create a full-fledged trading strategy, only one indicator will be enough, and a standard one, which is available in any terminal. Below, in the same section of the graph, is a diagram of work under the new rules:



Thus, a trend reversal is considered to be when the relative strength index, calculated over 120 days, reaches 50% of the value. And the entry points themselves are determined using a more dynamic index, and what is important is not touching the 50% line, but rather returning back to the bullish power zone (for the mentioned example).

Readers have probably already noticed that reversal indicators work well on large time frames, but there are also good algorithms for intraday traders, for example, Heiken Ashi. This reversal indicator was not mentioned by chance, since in translation from Japanese its name means “middle stripe”, i.e. again echoes a certain point of balance.

Unlike RSI, the procedure for its application is even simpler, since the original formula gives unambiguous signals and excludes alternative interpretations. Note that in intraday systems, Heiken Ashi showed the highest efficiency on the hourly chart, since with such a filter the influence of random fluctuations is eliminated.



As you can see, this reversal indicator calculates new bars using all the prices of the current and previous bars, due to which it allows you to smooth out fluctuations better than any moving average. In addition, in the specialized literature there is a description of candlestick patterns specifically for Heiken Ashi, which are interpreted similarly to standard candlestick patterns.

As an example, let's take the following rule - a long red candle without a body is a strong sell signal, so if you study this material, you may not need auxiliary reversal indicators to look for confirmation.


Now I would like to remember about another trend reversal indicator on Forex called “Neuro Trend”. Its formula cannot be described in two lines, and this is not really required, because, to put it briefly, to calculate the lines, price extremes for the specified period are taken into account. The figure below shows an example of calculating this indicator for 120 minutes:



For the sake of objectivity, we note that the blue and red “circles” can be ignored, they are useless and were intended as signals to buy and sell. In practice, if you enter into transactions at the moment the lines cross, there is a risk of buying at the top and selling at the bottom. But in all other respects, this indicator is much more effective than the above-mentioned ones, since it identifies trend reversals with almost no delay.

It is obvious that the reader already has suspicions about the subject of “redrawing” of historical meanings. This time we can be happy, because the line, once marked, will not change in the future. The only caveat is that a slight redrawing on the last candle is possible, since closing prices are used for calculations, not opening prices, but almost all indicators suffer from this problem. It is for this reason that it is wise to use Neuro Trend for minutes to minimize errors.



Of course, each of the listed algorithms is useful in its own way, since it is used on its “own” timeframe, but, as already mentioned, in our opinion, the last one is the most effective. The reader may not agree, so in the figure above we compared all three indicators in similar circumstances, but everyone will, of course, make their own choice.

Trend reversal indicators help traders find confirmation of price reversal signals from chart patterns. As you understand, there are no accurate trend reversal indicators, because if there were, then all traders would trade using indicators and live happily ever after.

The Forex market is not so simple that it can be accurately measured using indicators. Therefore, we will use trend reversal indicators in relative values, trying to mathematically calculate the probability of a reversal in expected places on the price chart.

The very first reversal indicator, with which we will try to determine the probability of a change in price movement, is the Moving Average indicator.

Moving Average trend reversal indicator

If we use only one MA as an indicator of a trend reversal, we will receive a lot of false signals. But, if you adopt the technique of constructing a fan from the MA, you can get a very good reversal indicator.

In the figure you see three MAs (simple) with different periods: blue – 100, green – 35, red – 15. The blue one, the heaviest MA with a period of 100 on the H1 chart of the pound/dollar currency pair, shows the general direction of price movement. However, the price manages to falsely break through our MA (100) several times, thereby confusing the trader and giving false signals about a trend reversal.

  • If the candle closes below MA (100), below MA (35), below MA (15) and the younger moving average is lower than the older one, then we receive a signal for a downward trend reversal. In our example, such a bearish reversal occurred in the pound/dollar pair on the left of the chart.
  • A similar rule is for an uptrend: if a candle closes above (100), above MA (35), above MA (15) and at the same time the faster moving average turns out to be higher than the slower one, then we open a buy trade. An example of an indicator signal about a trend reversal is indicated by a red circle below.

If you plot this fan on your chart of a currency pair, you will find that it gives signals at the beginning of a very strong trend move, but it also gives false signals when the market goes flat. Another disadvantage is that signals for a trend reversal from the MA fan are quite rare, thereby reducing the likelihood of making money.

MACD trend reversal indicator

The MACD indicator is not as good at identifying trend reversals as the MA. However, the MACD indicator shows the strength of the trend and its cycles quite well.

Looking at the figure, you see the MACD indicator (5,100.5) on the H4 chart of the euro/dollar currency pair. A good signal for a trend reversal is the intersection of the main (green) histogram and the signal (dotted red) line of the zero value.


Please note that the crossing of zero should occur exactly on two MACD values: the main and signal lines.

There are cases of false punctures at the cost of their levels, then the MACD trend reversal indicator with a green histogram crosses the zero mark, and the signal (red dotted) line may not cross and thereby eliminate the false entry signal.

In our example, the euro/dollar sell reversal signal appeared at 12:00 on May 9, 2014 and lasted until 20:00 on June 19, 2014. Thus, the downward movement that followed the signal on the MACD reversal indicator could bring us 200 points arrived.

Of course, the MACD indicator is not sugar, it also has disadvantages: the signal lags, reacting to false price punctures. However, despite all the shortcomings, the MACD indicator deserves to be included in your trading development portfolio.

Stochastic Oscillator trend reversal indicator

The third reversal indicator can be called the Stochastic Oscillator. The Stochastic indicator also shows the beginning and end of a cycle very well, thereby giving us good signals about a price reversal.


In front of you in the picture is the Stochastic indicator (250,3,3), which is plotted on the hourly chart of the euro/dollar. As you can see from this example, the Stochastic reversal indicator accurately shows a change in the direction of the exchange rate movement.

Stochastic (250,3,3) signals a change in the zone of bulls and bears when it shows the intersection of 80 and 20.

Please note that the signal to enter downwards on the euro/dollar appeared on January 24, 2014 and lasted until the Stochastic indicator (250,3,3) crossed its level of February 20 - 05, 2014. This trade opened short would have brought us a profit of about 150 points.

The advantage of the Stochastic indicator is its sharp reaction to a change in the direction of price movement. Judge for yourself, the Stochastic indicator showed the entry to sell on the euro/dollar more accurately than the MACD indicator, and gave a signal to exit the deal almost at the very lows of the movement.

Alligator trend reversal indicator

Another successful trend reversal indicator is the Alligator. The Alligator indicator consists of three moving averages that have different offsets from the price.

  • Alligator's jaw (blue line) with period 13 and offset 8.
  • Alligator's teeth (red line) with period 8 and offset 5.
  • Alligator lips (green line) with period 5 and offset 5.

As can be seen from the figure, the Alligator indicator accurately shows a trend reversal and is very similar to our fan from the MA.

The principle of entry using the signals of the trend reversal indicator - Alligator is exactly the same as with the fan from the MA:

  • Entry to buy: if the price is higher than Alligator Jaw, Alligator Teeth and Alligator Lips.
  • Entry to sell: if the price is below Alligator Jaw, Alligator Teeth and Alligator Lips.

In addition, for a more accurate signal, you should wait until the distance between the jaw lines and the Alligator’s lips increases.


In our example, we entered the sale of the dollar/yen pair on April 7, 2014 and exited when the Alligator lines crossed each other, which indicated that the downward trend was losing momentum. As a result, we earned 175 points of profit using the trend reversal indicator – Alligator.

The difference between the MA fan and the Alligator indicator is that the Alligator is one indicator of three MAs, while the moving average fan is three separate indicators. Also, the Alligator indicator has built-in price shift data for all three MAs. In addition, the Alligator indicator is more visual. But, this is a matter of taste.

In principle, you can set up a fan from the MA, enter the shift of moving averages there and you will have exactly the same Alligator.

In addition to the standard trend reversal indicators we offer from the MT4 platform set, there are many custom indicators on the Internet that signal a change in the direction of price movement.

However, we would like to point out that no indicator will accurately show you the market reversal. Market reversal indicators only signal the mathematical probabilities of a trend reversal, and do not show the exact locations of such reversals.

Many newcomers to the Forex market confuse graphical analysis of price reversals with mathematical (indicator) analysis of trend reversals.

A true trend reversal in the foreign exchange market can be determined by the characteristics of the price reversal. We need reversal indicators in order to confirm the mathematical probability of the beginning and end of a reversal trend.

We will not reveal a big secret if we say that a trend reversal occurs in three phases:

  1. Breaking through the support/resistance level on the chart period of your choice.
  2. Fixing the price below/above the support/resistance level.
  3. Continuation of movement directed in a different direction relative to the previous one.

Therefore, summing up all of the above, we argue that any trend reversal indicator will signal you that the support level has been broken. However, breaking through the support level is not always true, because we can end up with a scam or collection of stops. To prevent this from happening, a trader must first think with his head, read the market using graphical analysis, and only then look at the values ​​and readings of trend reversal indicators.

The nature of the movement of any price asset consists of a certain cyclicality, because any trend ends sooner or later, and then after a while it begins again with greater or lesser force.

The most interesting thing is that traders, knowing that the market is cyclical, never think about the end of the trend.

Indeed, any price movement is nothing more than a projection of the actions of exchange participants.

Consequently, when the majority of players achieve their goals, for example, to buy an asset at a certain price, the price movement is completed.

Thus, by predicting the end of a trend, a trader can save himself from losses on already open positions.

The end of a trend, in turn, is also the starting point of a new price movement. This allows you not only to save the profit you have already made, but also to open positions almost at the very beginning of the price movement.

Instead, he proposes to consider all micro trends without exception, and his tool, in turn, allows you to timely record trend end points with high probability.

It is worth understanding that the tool has only an auxiliary function, since the basis for constructing lines lies directly with the trader himself.

The end of trend indicator is used on any currency pairs without exception, and even time frames, as it shows, from a technical point of view, the prospects for movement of a selected area of ​​the price impulse.

Installing the end of trend indicator in MT4

The concept of this tool first appeared back in 2013, when one of the active participants in Forex forums shared his vision of the market and also supported his trading methodology with screenshots.

Since then, the tool has been improved year after year, and the latest version was published in the official MT4 developer library at the end of 2017.

Thus, from the very beginning, the end of trend indicator was a non-commercial product and was distributed completely free of charge, and after adding it to the library, you can install it without any additional downloads.

Installation via the platform is very simple. Open the trading terminal and move your gaze to the very bottom of the platform, where you track your balance almost daily.

The next step is to open the library tab and sort the list so that only technical indicators are displayed.

Find the end of trend indicator and use the additional menu to load exactly as shown in the picture:

If for reasons unknown to us the indicator is removed from the library, you can resort to the standard method.

Scroll to the very end of this article and download the file with the indicator directly. The next step after downloading will be installation according to the standard scheme, when you only need to drop it into the Indicators folder through the data directory.

Restart the platform or update it in the navigator panel, otherwise the end of trend indicator will not appear in the list of custom indicators.

Principle of application. Working with the tool

As we have already noted, the end of trend indicator is only an auxiliary tool and works purely according to the trader’s markings made independently.

It is worth understanding that markings should be done by drawing trend lines for micro movements. To do this, lines should be drawn following the arrows of the indicator, a fractal of the same direction.

After the line is drawn, make sure that it has the name TrEnd, since it is by this prefix that the indicator will make its markings.

The dotted line on the chart shows a possible time point where the trend will eventually end. The dots on the chart in the form of a sight and a circle are potential targets if the price deviates from the drawn trend line.

It is also worth noting that the trend line can be drawn along local extremes and even extremes of technical indicators. The principle of using it to find an entry point is no different from trading along trend lines:

Thanks to the settings, you can set the color of the lines for rebound and breakdown, the number of the window for drawing (if you are making markings on a technical indicator, you need to set the number of an additional window).

And enable the display of certain lines on the chart and technical symbols. All menu items are in Russian, so there should be no problems setting it up.

Trading binary options is a very effective way to make a profit if you understand what the process is. In trading, you can perform only 2 actions: trade on a reversal or continuation of a trend. A trend reversal is the moment when the trend in the value of the selected instrument (currencies, futures, stocks) changes from downward to upward or vice versa. To determine the moment of direction reversal, many traders use special technical indicators that provide specific signals for action. However, such signals are often given late, and the results of transactions can be unprofitable. You can determine a trend reversal without indicators using different techniques.

Conventional graphical constructions will help determine the trend of price movements on the stock exchange. If there is an increasing trend, then an upward price prevails in the market, and vice versa, with a natural decrease in extremes, a downward trend prevails in the market.

As long as the trend continues its upward or downward trend, you can open a buy or sell trade on a currency pair. If such a pattern is violated, it is worth paying attention to the prerequisites for changing the direction of movement.

At a directional reversal, there are several entry points into the market:

Figure 1. Uptrend phase

Determining trend reversal by trading

Trades are small horizontal sections of the chart that appear after an increase or decrease in prices. A trend means a clear and precise movement of the exchange rate in a selected period of time. It can be bullish or bearish. Bullish is when the price of quotes is constantly increasing, and the new maximum trading value will be greater than the previous one.

Bearish is a downward price movement, in which the next trade will always be lower than the previous one.

Figure 2. Bullish and bearish trends

Therefore, every significant number of candles on the chart will help determine the further movement of quotes. There is a constant battle between bulls and bears in the market. Moreover, the former will try to create a breakdown above, and the latter - downward. When one side wins, the price will move out of the range.

Determining trend reversals using trend lines

Classic trend reversal patterns

For profitable opening of transactions in the markets, special ones have long been used. Since it is quite possible to determine a trend reversal without indicators using existing classical patterns, it is worth considering the main ones:

  • triple top or bottom;

The first pattern of chart movement is the most popular, simple and accessible figure, signaling a change in its direction of movement. The model represents a line of the neck, above or below which the shoulders (right and left) and the head are located between them. It is recommended to open a deal when most of the movement in the outward direction has already been completed.

Figure 3. Head and Shoulders Figure

With a double base or top, two figures are formed with the same rules: two shoulders are located on the same strip. Only after the quote breaks through the neckline is it worth opening a trade to minimize risks.

Figure 4. Double top

The triple top or bottom is similar to the previous figure, but consists of three shoulders located on the same line of the neck. It often happens that in a double figure the neck line is not broken through and a third shoulder is formed. Such detection guarantees a trend reversal. It is also recommended to act after passing through the neck line before concluding a deal.

Figure 5. Triple top

Diamond is a diamond-shaped pattern that appears in an uptrend or downtrend. When a sloping resistance line is broken, it becomes possible to open a trade to increase or decrease the trend. The height of the figure is determined by the maximum price levels. If you look closely at the diamond shape, you will notice that it resembles other shapes, including head and shoulders, double and triple tops. When opening a transaction, you must wait for it to consolidate or take a risk so as not to lose the meaning of opening a position and not miss the deal.

Figure 6. Diamond figure

Candlestick analysis

Candlestick trend reversal patterns must be combined with technical analysis to obtain the most accurate results and minimize the risk of entering into unprofitable transactions.

The following direction reversal patterns can be identified:

  • bullish and bearish engulfing;

In the first option, the chart shows a pair of candles. The first is a continuation of the previous trend and has a corresponding color. The second will symbolize the beginning of a new trend and will have a different color. A characteristic feature of this pattern is that the body of the second candle completely engulfs the body of the first. In case of bullish engulfing, the direction will change from downward to upward; it is necessary to open a buy deal. In the case of bearish engulfing, the chart turns downward.

Figure 7. Bullish and bearish engulfing

Shooting Star and Hammer – These reversal patterns can be confused with each other. A shooting star is a short candle with no lower shadow, but a very long upper one. At the same time, its color is not important.

A shooting star is a pattern that appears in a rising market and is a signal of a downtrend.

A very close pattern to the shooting star is the Hammer. It heralds the imminent arrival of a growing trend. It looks like a small candle without an upper shadow (or a very small one), but with a long lower one. On large time frames, colors will not matter, but on short interval trades, white will be stronger than black.

Figure 8. Shooting Star and Hammer

Trend reversal according to Sperandeo

A trend reversal according to Sperandeo is also called a change in movement to 1-2-3. The method involves constructing a trend line, in which the following rules must be observed:

  • select the desired period - short-term (from several days to a week), medium-term (up to several months) and long-term (up to several years);
  • the tendency for quotes to increase should be based on determining the upper and lower minimums, connecting them with a line without crossing the price;
  • to draw a band for a downward trend in the market for a given period of time, you need to find two maximums (lower and upper), and similarly build a line without price intersections in the selected period.

After laying a line using the specified method, it is necessary to indicate a trend breakout on it with the number 1, conditionally. The second point marks the segment on the chart where the price fluctuates at the minimum-maximum, but does not break through the given line. When a breakthrough does occur relative to the first symbol on the chart, you need to mark this segment with the number 3. Now you can safely open a buy or sell deal, respectively.

Results

Trading without indicators is actively used by traders, since it has many valid and effective algorithms. They help avoid the use of late signals and increase the likelihood of concluding a profitable trade.