A Basic Guide to Understanding Reversals and Breakouts

Traders who study their time frame charts religiously will learn how to pick out certain indicators that can help to forecast a trend. Identifying these indicators early will help you to get a jump start on entering and exiting a trade at just the right moment to maximize your profit.

Time Frames

A time frame chart is a simple method used by traders to get a clearer picture of the direction pairs are heading. You choose the length of time you want to study, say 2-hour increments for short term goals or 8-hour increments to study the long term trending of a pair. The chart will show you the averages during that time, smoothing out the variations to make it easier to see the important details you need to know.

Two of the tools that your moving averages will help you base trades off of are reversals and breakouts.

Spotting a Reversal

A reversal trade is knowing when a currency is going to make a sudden move in the opposite direction. Continue reading "A Basic Guide to Understanding Reversals and Breakouts"