Retracements:
Short term price corrections during an overall larger either upward trend or downward trend.
Retracements are price corrections and temporary price reversals that do not indicate a change in the direction of the larger trend.
These retracements can be used for short term trading ( scalping or day trading ... or longer time frames).
The main benefit of retracements are: you can enter a trade at a better price, just before the continuation of the original move.
Why retracements occur?
When more traders jump on a trade, some traders will take profit & close there trades causing a retracement to happen, or correction of major trend.
Retracement Rules:
1) Buy pullbacks in an uptrend
2) Sell pullbacks in an downtrend
*Example on 4 hour chart is a bearish trade with a retracement back into the golden zone of 38.2% to 61.50% which most reversals occur in, back into the major trend on that time frame. My advice is use Fibonacci indicator on 1 hour or higher to reduce the price action noise.
Short term price corrections during an overall larger either upward trend or downward trend.
Retracements are price corrections and temporary price reversals that do not indicate a change in the direction of the larger trend.
These retracements can be used for short term trading ( scalping or day trading ... or longer time frames).
The main benefit of retracements are: you can enter a trade at a better price, just before the continuation of the original move.
Why retracements occur?
When more traders jump on a trade, some traders will take profit & close there trades causing a retracement to happen, or correction of major trend.
Retracement Rules:
1) Buy pullbacks in an uptrend
2) Sell pullbacks in an downtrend
*Example on 4 hour chart is a bearish trade with a retracement back into the golden zone of 38.2% to 61.50% which most reversals occur in, back into the major trend on that time frame. My advice is use Fibonacci indicator on 1 hour or higher to reduce the price action noise.
