Between Reversal and Retracement, are two terms that many found but still many traders yanng wrong can not even correctly interpret both. Whereas if a trader can distinguish between Reversal and Retracement it is not impossible that a trader can easily make a profit from both of these patterns. If you belong to a trader who is still confused with the difference between Reversal and Retracement then you should listen to our review below.
In plain language, Reversal means a trend change pattern or in simplified language is a reversal. While Retracement has a meaning of temporary reversal or in simple language a pattern of reversal or change of trend but only temporarily.
Up here is it clear? Okay let's get into the next discussion
HOW TO SEE RETRACEMENT IN CHART
There are several ways typically used by traders to see a retracement in a price movement, including:
FIBONACCI
This is the most popular way used by traders to see a retracement where the retracement area will be in the area of 38.2%, 50% and 61.8% until the trend actually moves in the right direction. If the price is able to pass through this area then what happens is most likely there is a price reversal or trend change.
From the picture above is quite visible a Retracement that occurs up to 61.8% Fibonacci area while the second occurs up to 50% Fibonacci area. From the picture above it is also seen that the price only temporarily reverses and then resumes the actual trend, or with the language often used by traders, Retracement is a price correction, where prices do not always move straight in a trend.
PIVOT POINT
The next way that can be used to see Retracement is to use a pivot point, where a trader calculates exactly the calculation number of support and resistance. Not just a support and resistance course, but here a trader leve support and support each up to 3 levels. So here will form a total of 6 levels of support and resistance, S1, S2, S3 and R1, R2, R3.
How to use it is very easy. From a price that is currently on the move, if when touching S1 / R1 or S2 / R2 and turned back, then what happens is a Retracement and the price will continue the actual trend.
But if the price has moved to S3 / R3 then you should be alert, because it is quite likely to happen a reversal or reversal. Although there is still the possibility of the price back again to the real trend.
TRENDLINE
In addition to Fibonacci or Pivot, the most commonly used method is to use trendline, where we have previously discussed how to create a trend line or trendline.
The basis is actually quite easy here, where a price if it is on the trendline and then bounced then it is a Retracement, different if the price is past the trendline, then what happens here is a Reversal where the price reverses direction.
CONCLUSION
From what we have discussed above it can actually be deduced that a reversal pattern will be preceded by a Retracement, but when a Retracement is excessive and exit from the level level that has been determined from the above three ways then what happens is a Reversal, where the price will turn Direction and there is a permanent trend change.
Here is a complete comparison between Reversal and Retracement
RETRACEMENT
It will happen when the trend or price is formed very strongly
Its nature is only temporary, in other words this is just a price correction only
Its nature is technical
Reversal
Can happen anytime in a price chart
Its permanent, where the price will actually change its trend
Its nature is fundamental, where there is a news that affects a price
The methods and methods we provide above can be used as a way of looking at a Retracement or Reversal pattern, but you should know, nothing is certain in a market, there are times when a price goes through the level we have created with one of Three stages above but the price is back again (Retracement).
All you have to do now is expand the experience ahead of the chart so you can identify well a price, whether in front of you this time is a Reversal or just a Retracement.
In plain language, Reversal means a trend change pattern or in simplified language is a reversal. While Retracement has a meaning of temporary reversal or in simple language a pattern of reversal or change of trend but only temporarily.
Up here is it clear? Okay let's get into the next discussion
HOW TO SEE RETRACEMENT IN CHART
There are several ways typically used by traders to see a retracement in a price movement, including:
FIBONACCI
This is the most popular way used by traders to see a retracement where the retracement area will be in the area of 38.2%, 50% and 61.8% until the trend actually moves in the right direction. If the price is able to pass through this area then what happens is most likely there is a price reversal or trend change.
From the picture above is quite visible a Retracement that occurs up to 61.8% Fibonacci area while the second occurs up to 50% Fibonacci area. From the picture above it is also seen that the price only temporarily reverses and then resumes the actual trend, or with the language often used by traders, Retracement is a price correction, where prices do not always move straight in a trend.
PIVOT POINT
The next way that can be used to see Retracement is to use a pivot point, where a trader calculates exactly the calculation number of support and resistance. Not just a support and resistance course, but here a trader leve support and support each up to 3 levels. So here will form a total of 6 levels of support and resistance, S1, S2, S3 and R1, R2, R3.
How to use it is very easy. From a price that is currently on the move, if when touching S1 / R1 or S2 / R2 and turned back, then what happens is a Retracement and the price will continue the actual trend.
But if the price has moved to S3 / R3 then you should be alert, because it is quite likely to happen a reversal or reversal. Although there is still the possibility of the price back again to the real trend.
TRENDLINE
In addition to Fibonacci or Pivot, the most commonly used method is to use trendline, where we have previously discussed how to create a trend line or trendline.
The basis is actually quite easy here, where a price if it is on the trendline and then bounced then it is a Retracement, different if the price is past the trendline, then what happens here is a Reversal where the price reverses direction.
CONCLUSION
From what we have discussed above it can actually be deduced that a reversal pattern will be preceded by a Retracement, but when a Retracement is excessive and exit from the level level that has been determined from the above three ways then what happens is a Reversal, where the price will turn Direction and there is a permanent trend change.
Here is a complete comparison between Reversal and Retracement
RETRACEMENT
It will happen when the trend or price is formed very strongly
Its nature is only temporary, in other words this is just a price correction only
Its nature is technical
Reversal
Can happen anytime in a price chart
Its permanent, where the price will actually change its trend
Its nature is fundamental, where there is a news that affects a price
The methods and methods we provide above can be used as a way of looking at a Retracement or Reversal pattern, but you should know, nothing is certain in a market, there are times when a price goes through the level we have created with one of Three stages above but the price is back again (Retracement).
All you have to do now is expand the experience ahead of the chart so you can identify well a price, whether in front of you this time is a Reversal or just a Retracement.
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