Technical Indicators for Forex Trend Reversals
1. Moving Average Convergence Divergence (MACD)
Measures the relationship between two exponential moving averages.
A bullish reversal is indicated when the MACD line crosses above the signal line.
A bearish reversal is indicated when the MACD line crosses below the signal line.
2. Relative Strength Index (RSI)
Measures the momentum of a currency pair.
Extreme overbought (above 70) or oversold (below 30) readings can indicate potential trend reversals.
A bullish reversal is indicated when the RSI rises above 70 and subsequently falls below 70.
A bearish reversal is indicated when the RSI falls below 30 and subsequently rises above 30.
3. Stochastic Oscillator (%K, %D)
Measures the momentum of a currency pair using a range from 0 to 100.
Overbought conditions (above 80) or oversold conditions (below 20) can indicate potential trend reversals.
A bullish reversal is indicated when the %K line crosses above the %D line.
A bearish reversal is indicated when the %K line crosses below the %D line.
4. Ichimoku Kinko Hyo (Ichimoku Cloud)
A comprehensive technical analysis indicator that includes multiple moving averages and oscillators.
Potential trend reversals can be indicated by:
Tenkan-sen (9-period moving average) crossing above or below the Kijun-sen (26-period moving average).
The formation of a «cloud» (area between the Tenkan-sen and Kijun-sen) that provides support or resistance.
5. Parabolic Stop and Reverse (SAR)
A trailing stop-loss indicator that tracks the trend and indicates potential reversal points.
A bullish reversal is indicated when the SAR indicator falls below the price.
A bearish reversal is indicated when the SAR indicator rises above the price.
6. Bollinger Bands
A volatility indicator that measures the standard deviation of a currency pair above and below its moving average.
Potential trend reversals can be indicated by:
Price approaching or crossing the upper Bollinger Band (overbought).
Price approaching or crossing the lower Bollinger Band (oversold).
Cautions:
No indicator is 100% accurate, and false signals can occur.
Use multiple indicators in conjunction to confirm potential trend reversals.
Consider fundamental factors and market sentiment when making trading decisions.