If we understand Forex reversals we can turn them into profitable trading opportunities

If we understand Forex reversals we can turn them into profitable trading opportunities

If we understand reversals we can turn them into trading opportunities, so taking a look at the price action from this point on, we got a higher, higher, higher, higher, higher, higher, higher high, now, you can see at this point, just here, we Breaking through the higher low, now this will be a lower low Well, this is the point where we went from higher highs and higher lows to a lower low now after breaking to a lower low we see a lower high.

If we understand Forex reversals we can turn them into profitable trading opportunities

We may see a new lower low we see a higher low and so on and so on, well you see this trend continuing by marking the structure from above we have a lower lower lower lower high so we were in an uptrend but when we broke the structure to this lower low that started a trend New bearish where we will then focus instead of looking to buy on selling well, so that’s the basic component that you need to understand about the markets is just the theory of market structure.

As we will only buy in the market that is forming higher highs and higher lows, we will only sell in the market that is forming lower lows and higher lows, so this is the theory of market structure. The first thing we need to do is to be aware of the basis of everything that we are going to do once we have An idea of ​​the direction the market is heading in whether it is an uptrend or a downtrend.

Find actual Forex trading opportunities

The doors are then open to finding actual trading opportunities. To do this, we will use a concept called supply and demand to explain what fast supply and demand is, as markets are driven by a battle between buyers and sellers when more people are buying than selling.

Markets will rise when more people are selling than buying in the markets now, and this generally happens because of demand, okay, so if demand is high for an asset, market prices will rise.

Traders want to buy an asset in a Forex transaction

People want to buy an asset, and they will be willing to pay more for it When demand is low for the asset, markets will go down because prices have to go down to entice people to pay prices, think of it this way if you find a car you want to buy and it’s on the market for $50,000 but the price goes up To 55,000

You can buy it anyway because you want it now If you like the car but aren’t interested in it and the price is $50,000, you may not want to pay it but if that price drops to $40,000 or $35,000 maybe you’ll be tempted to buy the car.

Forex markets will rise when demand is low

Now well almost the same theory here we’re just looking at different assets, so when the price goes up in the EUR/USD market, it just means that people want the Euro for specific macroeconomic reasons, so when demand is high, the markets will go up when demand is low, the markets will now decline.

I’ve explained this to you so you can understand the theory behind what I’m about to show you which is supply and demand zones follow the theory of supply and demand that I just explained, I want to show you now how we can translate that to charts.

Forex demand zones and our supply zones

This comes in the form of zones, so we have demand zones and we have supply zones. A demand zone is a consolidation zone and it’s just an area where the market moves sideways before a big upward move occurs. A supply zone is the same as a consolidation zone before a big downward move occurs. Demand zones happen in uptrends.

Supply zones happen in downtrends and the theory is always to buy from demand and sell from supply now, the reason why we see demand zones as a good place to buy from is that if we take into account what is happening in this market, a market going up means that people want to buy, the fact that we have seen A big boost from this consolidation of the demand area.

This shows us that this was considered a good price to buy at so we can then assume if the market were to return to this level, traders would see this as a discounted price to buy from again, and we would see a new influx of order and new buying taking us to new highs.

Waiting for market declines in Forex

The concept is to wait for pullbacks to the demand and buy zones once the market retests it now for supply, we are looking at the opposite in a market where when moving in a downtrend, there is an excess of supply, so demand is not strong enough, people who hold the asset will have to… Selling it at a lower price to induce people to enter the market and encourage people to enter the market.

On the other side of their trades, in a downtrend, the supply or consolidation area before a big downward move will be seen as an excellent price to sell, so if the market can get here, sellers will be happy to sell their assets because they get a better price than if they were selling Low price here.

Summary

This means that if we see the market moving in a downtrend we will wait for a pullback to the supply zone and then sell well this is the theory Supply and demand are directly related to the structure of the market and the demand zones and supply zones this is exactly where we will enter our trades here is a real example of a demand zone And how we’re going to plot it on the chart and how we’re going to trade it, so initially we can see the market here is in an uptrend, okay, we’re forming these higher highs and higher lows.