How do you trade the correction?

First of all, the current trend should be determined. If, for example, the trend is currently bullish, drawing the ascending trend line at least should connect two points to each other (one of the rules for drawing the rising trend line).

The second step is to draw a Fibonacci correction on a previous wave and wait for the price to reach 0.618 or 0.786 to buy with a positive price behavior if the current trend is weak. However, if the current trend is strong, the purchase is with a positive price behavior at 0.382.

Stop loss is below the bottom in case of buying at 0.786 levels but in case of buying at 0.382 it is at 0.50.

Take Profit is at 2: 1 (twice the stop loss) if you are a short term trader but if you are a medium / long term trader you can wait until you see signs of weakness in the trend.

On the downside, it will be a selloff in the same areas with no change and the loss will be at the top instead of the bottom in the previous case and the rest of the conditions unchanged.

And the previous chart of the pair sterling to the yen to clarify, we note in the area 1 opened the center of the sale result of a negative price behavior at 0.382 Second point stop losses at 0.5 Third bluff out of the speculator with twice the stop loss point IV Exit traders on the trend with the Negative price behavior and signs of weakness of direction.

There are classic price models Continuing their application with the previous strategy helps in determining the target and is reliable in trading to view click here and to read the second part click here.

How do you trade on a reversal?

Reflections can be traded in several ways, the most important of which at all is the breakthrough / break the trend line, in the case of the upward trend we will apply the following rules:

Waiting for the bullish trend to break after a long uptrend that will continue for several days.

We analyze the fraction. If we have a defect in the base of the bullish trend, such as breaking a previous bottom and forming a lower top than the other, make sure that the break that has occurred is real.

We sell after the retest fails to breach the broken trend line.

The closing of the position shall be by breaking the descending trend line or any other preferred method of the trader.

Stop loss is usually at the top of the peak but in some cases the stop loss is large or does not bear the account of the trader, so we recommend to follow the way to stop losses appropriate.

The following chart shows how trading on the upside reversal is bearish.