Reversal/retracement warnings in general

I am pretty much new to forex and i am trying to apply a couple of indicators to ease my job and maybe give me a couple of warnings regarding the complex topic of reversal or its sibbling... a retracement.

In an uptrend, which indicator or set of indicators would give the trader early warnings that a retracement is on the verge to manifest ? The simple moving average does not seem to do a good job here. What would you use instead ?

hi Trend

Tell you the truth I don't think your going to get the answer your looking for. In my opinion indicators are hit and miss anyway, but if you apply good money management you might stand a chance, or not. For a start there are different trends, and degrees of trend that you should recognise. Also, is price reversing rather than retracing, its a mine field dude, exactly how the big boys want it... best of luck

Hi trend,
It goes without saying - but I'll say it anyway - that there is no magic bullet. Indicators are just that and they are prone to leading one down some dark and dangerous alleys if one follows them blindly without understanding fully how they work and their respective strengths and weaknesses. However, they do have their uses. I used to be a heavy indicator basher, but I'm much more moderate these days. I'm a huge fan of ATR as it does lots of useful things. Most importantly, it's a great tool to enable one to adjust position size as it does a good job of measuring volatility. Viz a viz your question though, I'm on the lookout for possible trend change when price has exceeded it's daily ATR. This doesn't apply on strong trending days or when there are news announcements etc. It's only a very rough guide and I look to usual suspects of price action, volume and S/R to alert me to an actual trend change or trend running out of steam. It's more useful for exiting a trade (or keeping one out of a trade altogether) than it is an aid for trade entry. There are also some interesting ideas in this thread that you might find useful:
http://www.trade2win.com/boards/forex-strategies-systems/33407-can-anyone-recommend-strategy.html
cheers,
Tim.

trendisyourfriend said:

In an uptrend, which indicator or set of indicators would give the trader early warnings that a retracement is on the verge to manifest ?

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if it's sunny, go long; raining go short. simple as that .....

if it's sunny, go long; raining go short. simple as that

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I would prefer going to the beach having my eLONGated body disposed aLONG a LONGitudinal axis and facing the sun of course.

rathcoole_exile said:

if it's sunny, go long; raining go short. simple as that .....

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This reminds me of a story told to me in person by another T2W member who met a trader with an equally bizarre strategy. Said trader had a full time job and set stop sell/buy orders on the DOW when he arrived at work. His decision process was very clear cut and simple. It just so happened that he passed through 9 sets of traffic lights on his way to work. If 5 or more of the lights were green, he'd enter a stop buy order. If 5 or more were red, he'd enter . . . Amber would be either green or red depending on the colour it next tuned to. According to my friend, the trader in question implemented a rigorous risk management strategy and his results weren't at all bad!

Tim.

trendisyourfriend said:

I am pretty much new to forex and i am trying to apply a couple of indicators to ease my job and maybe give me a couple of warnings regarding the complex topic of reversal or its sibbling... a retracement.

In an uptrend, which indicator or set of indicators would give the trader early warnings that a retracement is on the verge to manifest ? The simple moving average does not seem to do a good job here. What would you use instead ?

Click to expand...

It's potentially very simple, in theory.

Price will stop rising at a price level where there is more supply than demand.

Price will stop falling at a price level where there is more demand than supply.

I would suggest that you first learn to:

1. Analyse a price chart in terms of where the buyers and sellers appear in great numbers to move the price up and down respectively.
2. Watch price action in these price areas.
3. Identify trendlines and trend channels that the market participants are reacting to.

Then you learn about the vast number of indicators and studies to give you price derived data.

Finally, please don't look at any chart below 1 hour as it's just noise!