Catch Turning Points In The Forex Market

Published: 23rd February 2011
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Any time the currency trends in a specific direction and then clearly changes direction and trends in the opposite direction is referred to as Trading turning points. Forex traders often refer to retracement or bounce trading as turning point trading.

In order to catch and trade turning points in the market one has to understand what makes the market move. The only way market movements can occur is by the buy and sell order flow into the Forex market. It is as simple as that. You therefore have to become an expert at understanding how the market responds to these sell and buy orders and where they are likely to accumulate.

There are four major groups of market participants who cause orders to be placed in the Forex Market.

The first group consist of the major banks and institutions. The market moves as a result of their actions. You better believe this for your own trading sanity. How often have you been in a transaction which is going nicely positive for an hour or so and then suddenly goes thirty to fifty pips against you for no apparent reason? There was no announcement. There was no major support or resistance where the price turned. It was not at a special time of day such as a market opening or close or an annoucement time i.e. market opening. One of these big players may just have placed a hundred million order in the market.Often these big players did not like the direction of a particular market trend and then boldly introduced a huge amount of orders in the opposite direction. When the price is just drifting around these orders have an overwhelming impact and will reverse the market or start a trend. The risk in not that great and often these deal go positive within minutes. This happens six to eight times a day and explains why in spite of following your trading plan to the letter your deals go bad. These moves can be traded if your broker supplies volume information and often you will see the volume go up before the trend moves.

The second group are orders placed by participants in the market based on Technical Analysis approaches. These orders are placed at various strategic price levels and act as entry orders or stop orders. These orders accumulate around support and resistance levels in the market. This explains why when a certain price level is reached there is often a big move in the market as all these orders are activated at the same time. You need to be competent at identifying these support and resistance levels so that you can anticipate these moves. A large part of the market movement is based on these price levels. Round number price levels, Fibonacci levels, Pivot points and historic support and resistance levels are used by traders to trade these levels.

The third group are orders that are placed in the market as a result of economic announcements and news. These orders can move the market over one hundred pips in two minutes and can also reverse the market over two hundred pips in the next five minutes. They are orders that are placed as a result of the fear and greed reactions to current news. You need to watch the economic announcements schedule closely to make sure you are not adversely affected by these orders. It is better not to trade these probable whipsaw moves.

The fourth group are orders that are processed by the financial institutions based on their actual need to buy and sell currencies in order to settle commercial trade transactions or investment money movement transactions. When financial markets open and when they are about to close, are times when these transactions can occur. This explains how trends can occur at these times.

Using the order flow behaviour in the Forex market as mentioned above has helped many traders understand the price movements and has given them the ability to take advantage of these opportunities.


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Alex du Plooy is a trader for Expert4x and has regular live trading webinars to discuss as demonstrate forex trading techniques in action. He regularly contributes to videos, articles and systems promoting techniques and trading approaches to help and assist Forex traders.

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