In the process of foreign exchange trading, the judgment of the trend is an important factor in determining the direction of the transaction. However, it is still difficult for many investors to grasp the method of judging the position of the inflection point, which leads to a certain degree of loss or is not very satisfied with the profit result.
In fact, to judge the inflection point of the trend in foreign exchange trading, you only need to remember three points. There are three divergence methods that can be used to identify trend turning points:
In the first way, the angle of the latest decline (rise) is compared with the angle of the last decline (rise).
Angle represents speed, represents efficiency. If the angle slows down, it indicates that there is a deviation in efficiency. This deviation is based on the reduction in the efficiency of the power to maintain the original trend, and the internal power of the original trend has undergone changes that are not conducive to maintaining the original trend.
In the second way, the range of the latest drop (rise) in foreign exchange trading is compared with the range of the last drop (rise).
Amplitude stands for overall strength, stands for effect, stands for endurance. If the amplitude is reduced, it indicates a deviation of the overall size (strength), which is due to the reduction of endurance to maintain the original trend and the failure of overall strength.
The third way is to compare the angle and magnitude of the latest rebound (callback) with the angle and magnitude of the last foreign exchange rebound (callback).
If the range is the same, but the angle increases; or the angles are equal, but the range increases, or both the range and angle increase, it indicates that the counter-trend force is strengthened, and an inflection point may be formed, and action can be taken after falling or rising again.
This is another form of divergence, a divergence from a countertrend force. It can be called reverse divergence. Of course, it is best to compare the angle and magnitude of the fall (rise) again with the last fall (rise), but the reverse divergence can be predicted in advance and may appear.
Factors Affecting the Inflection Point
1. Cycle problem
The cycle problem is a problem that exists in every market. For example, the interest cycle of the central bank has an important impact on the asset market. If investors master the interest cycle, they will have great profit opportunities in the asset market. There is also a cycle in the foreign exchange market, and the change in the real interest rate in the United States is one of the factors that affect the cycle of the dollar.
2. The market itself is a tool for digesting expectations
Let me explain to you, for example, that the market expects that a new cycle will start after the U.S. interest rate hike cycle has passed. As for the development factors that affect the market, we will not know until then. In the foreign exchange market, foreign exchange speculators generally regard unexpected political events as a cycle of news speculation. The most urgent task for foreign exchange speculators is to find out the changes in the cycle and how to adopt the correct investment strategy in this cycle.
3. Fundamental analysis
The basis of foreign exchange fundamental analysis is the development of national macroeconomics, asset market and political factors, as well as other factors that may affect the analysis of currency prices, so as to achieve the purpose of judging the direction of the market.
Macroeconomics includes: monetary policy, interest rate, gross domestic product, inflation rate, unemployment rate, etc. Asset markets include: stocks, bonds, real estate, etc.
Political factors include: geopolitical events, wars, terrorist attacks, natural disasters, diplomatic events, etc.
4. Technical Analysis
The technical analysis of the foreign exchange market is the research object of market behavior, predicting the future trend of market price changes, and the research of charts on market behavior. Technical analysis shows that market behavior includes digesting everything. All potential events, economic events, social events, wars, natural disasters, etc., are reflected in price changes.
Judging the trend of foreign exchange trading is very important to the choice of investment direction. If the trend is chosen correctly, then the profit is certain, but if the choice is wrong, then only losses are waiting for us. For many investors who have just started to enter the foreign exchange market, it is indeed very difficult to accurately judge the turning point, but they must also slowly explore in constant foreign exchange transactions.
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