Basics

Trend vs Reversal. How to Trade Forex?


Analyzing market trends and reversals are fundamental concepts in technical analysis. In this article we will try to better understand how to trade a trend, versus trading a trend reversal.

Trend trading occurs when you profit by following the existing price direction, which can be a main trend for a given time-frame.

  • When a main trend ends, another trend may emerge and cause the price to follow a different path than before.
  • A contrarian position is when one is expecting a trend reversal, and is the reason for counter-trend operators.

Concepts of an asset being traded at a premium, or above its intrinsic value (overbought) or below at a discount, or below its intrinsic value (oversold) are quite common when trading. These concepts are true whether trading shares, forex, or nearly any asset class, and is echoed in the famous saying “buy low, sell high.”

Buying low and selling high, especially during trends and trend reversals, is one of the key points that we cover in this article.

A view of forex market trends and reversals

The overall attitude of investors toward a particular security usually reflects its historical and current price movement, which creates a market sentiment of that asset. This market sentiment reflects not only the supply and demand factors, but also the crowd psychology in terms of expectations and consensus. These sentiment indicators also connects concepts of overbought, oversold, and support and resistance levels.

The forex market is much larger than the stock market or the futures market. However, unlike those exchange-traded markets, forex is off-exchange and decentralized, so information about volume and order flow are fragmented across different trading venues. Nonetheless, while large banks can affect the market, the impact is very small.  So, let us see if your stock strategy fits into forex trading.

In trend trading you must identify that a trend in the price exists and must hope the price flow will follow the momentum. Identifying the trend and taking the right position can help you minimize the risk or recover later on from a losing trade if the trend resumes.

And in counter trend trading you must identify a trend reversal and follow it in order to profit from a trend reversal.

Searching for indicators, signals, systems and determining the ones you think is best for your goals is very time-consuming. Most traders lose money because they have not prepared properly.

WiseInvest signals are the result of testing and validating with powerful and modern computational methodologies. After stress-testing a large number of various strategies, the best fit for us was trend trading.

From now on, we hope it will be more clear in your mind what is trend trading is versus trading a trend reversal.

The best way to trade forex

There are two ways to invest with our AI in forex:

1. Automated with AI-Trading. Check out the 3 steps to trade automated with our AI.

automated trading with ai bot

Don’t you have a broker account yet? Our AI is integrated to trade automated with the broker Oanda. Click here to open an account.

2. Manually with AI-Signals.

Wiseinvest also provides AI forex signals that perfectly fit into MT4, MT5 and any trading platform. To trade with our AI forex signals, you must simply copy the data you receive from each real-time signal into any forex brokerage account of your choice.

There are five unique variables for each AI signal, and each must be copied exactly, in order to match the performance of the signal as close as possible.

Each AI signal alert consists of the following five data points:

  • Symbol (forex pair)
  • Direction (long or short)
  • Position size (number of units or lots)
  • Take profit (price level to exit with maximum gain)
  • Stop loss (price level to exit with maximum loss)

You can trade forex with our free forex signals clicking here, or with our Premium subscription that provides you unlimited AI signals and automated AI trading in partner brokers. Whether you are a beginner or a Professional forex trader, our AI trading system can help you save time and improve your trading performance. Get started with free AI.

Here at Wiseinvest, all of our AI forex signals are given taking in mind trend trading strategies that were tested and improved to make consistent gains over more than 13 years of back test.

Disclaimer: Forex and Contracts for Difference (CFDs) are complex instruments and come with a high risk of losing money due to leverage. Forex trading is not suitable for everyone. You should consider whether you understand how forex and CFDs work and whether you can afford to take the high risk of losing your money.

The forex brokerages displayed shall disclaim the overall performance of traders in their platforms. Oanda warns that 76.8% of retail forex traders lose money trading CFDs. XTB warns that 80% of retail forex traders lose money trading CFDs. The forex broker Fxcm warns that 69.66% of retail forex traders lose money trading CFDs.

The performances aforementioned are not related to Wiseinvest AI forex trading and AI forex signals system. You can check the performance of our AI forex system on our dashboard.