How to identify price trend reversals

Few days ago, I posted a chart of gbp/usd to clear the doubts when you have found the Mature trend and want to "Identify a reversal" in such trend amid strong liquidation which is often good clue in reversals.

First of all those who don't check my earlier post check it here

Real Time Updates How to identify Reversals Chart posted Gbp/usd

As I have stated in my earlier posts, Its easy to spot trend reversals but most of them don't really happened before we start anticipating that reversal is on the card. Difference between success and failure of such traders depends on the overall picture attempts made and also the breakouts that failed. In the above mentioned charts, We clearly can spot that there was too many False breakouts that happened and fall short of supply areas which finally was good enough to offer an excellent risk reward ration before price Creates a overbought condition.

Those who visit the blog updates, have idea what is real overbought market conditions created by Bunch of traders to trap traders both sides of the market rather than depending too heavily on oscillators.

Time to wind up the week for more updates.

In the mean time check what is Continuation patterns offered by Shift in Value.

Reversals after Mature Trend

What do I mean mature trend? It's a trend that already has some history, this trend will attract a lot of weak holders - uninformed players, who are willing to get in the position and to take a risk, but they have relatively close stops that will be located in the same location.

Big market players use this liquidity (orders from these weak holders) to build their positions. So, engulfing patter occurs in conditions prepared for falling.

Supply and Demand What is overbought and oversold Market conditions

Has rally in aud/cad is outcome of Overbought Market

Situation of overbought market condition occurs when public accumulates extremely long inventory (even if smart money players are not too short). The same situation occurs when they hold extremely short inventory – we say that market is «oversold» in this case

Liquidation is the result of Overbought Market Conditions

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Hi traders!

We hear it very often that market is «overbought» or «oversold». But is it really possible to understand this looking at the single price chart without knowing real open interest (we don’t have this information for Forex currency pairs)? Some traders try to use RSI or other oscillators (divergences as usual) to spot «overbought» or «oversold» market.

First, let’s define what overbought (oversold) market is.

We all know that for every buyer there has to be a seller to have transaction executed, otherwise there’s no trade. So, how in the world can we have something «overbought» or «oversold» - do we really assume that there can be more buyers than sellers?

Let’s distinguish market participants of 2 parts: Smart money (institutional players) and public. Smart money often have information about large orders, they have access not only to interbank liquidity, they also execute orders of big clients, so they know what big guys are going to do – they work on the behalf of those big guys. On the other hand, we have «public» - uninformed market participants that usually just react and don’t have access to real liquidity.

Does really «public» exist on Forex? After all, it’s interbank market with minimum position size of 1 million. By «public» I understand not really retail traders that operate with 100 USD accounts, not at all. By public I mean orders brought to the marketplace by large ECN networks like EBS, Currenex e t.c. Such marketplaces collect smaller positions from retail traders all over the world and hedge them in the interbank market

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When small traders are very optimistic about possible growth, they bring a lot of fragile positions to the marketplace. Not surprisingly, market can liquidate (go down) very quickly if something happens.

And market has liquidated after news release on Aud/cad– rapid movement to the downside was result of massive liquidation:

Intrady day strategies for trading forex on all the majors pairs