Trend reversals in the Forex market happen all the time. As long as there is a trend, there will be reversals. Various trend and trend reversal strategies and trading tools are based on this one simple principle. It is simply a matter of how traders use the proper tools to spot reversals and trade trends. The Lucky Reversal indicator is one of many reversal trading indicators. However, it is unique because of the features that set it apart from other trend reversal indicators.
What is the Lucky Reversal Indicator
The Lucky Reversal indicator is exactly what it says it is, it indicates that the trend has changed from an uptrend to a downtrend, or from a downtrend to an uptrend. It communicates its conclusion by using red and blue arrows, each followed by a waving horizontal line. The blue arrow indicates the beginning of an uptrend, while the red arrow indicates the end of a downtrend.
The Lucky Reversal indicator has a second feature that is not obvious at first glance. This can be seen in the square white color displayed when the indicator indicates an eventual or temporary reversal.
The Lucky Reversal indicator is different from other trend reversal indicators there. The reason for this is that it is a lagging indicator, meaning that traders cannot use it to trade reversal breakouts.
Many traders experience many moments of frustration when trying to use this indicator to detect the beginning of a reversal, and this is not a bad attempt. If you go back and test this indicator and look at the charts, you will see that both bearish and bullish signals are located at the top or lowest pivot areas of major trend reversals. Take a look at the chart below for an example. It is clear that whenever you see an arrow, the price seems to reverse.
When you test the indicator in an active market, it is clear that a bearish or bullish signal is only visible when the market is in a reversal. The reversal arrow only appears on the chart after the reversal has been confirmed. This indicates that the indicator did not move in time.
The main advantage of the Lucky indicator
The main disadvantage in this Lucky indicator is its power. Since it is lagging, it cannot detect reversals, however you can use it to confirm trades in upcoming trends. For example, you can trade in an uptrend that comes after its reversal from a downtrend to an uptrend.
Trading strategies with the Lucky Reversal indicator
The most effective way to trade with the Lucky Reversal indicator is to integrate it into a trading system in which you can use it together with other trading tools. Other tools used in a trading strategy may be market structures or indicators (support and candles, patterns on candlesticks, patterns on charts, etc.).
There are many times when an indicator will show a white square, which indicates that it is most likely a reversal. After that, the price fluctuates, however the white square stays in its current position. If the trend reversal is confirmed, the white square will change to signal an uptrend or downtrend. When the candle ends, the candle when the white square turns into a buy or sell indication, you can place a trade.
For all available trading strategies, the most effective way to determine your profitability is to set price targets. Don’t wait until any indicator shows a signal to the contrary before closing the trade.
When you decide to establish your stop loss, make sure you are not taking more risk than you can afford to lose. The rule of thumb is to never invest more than 2% of your capital in a trade. When you take this idea to heart, you can use any method you are familiar with to set a proper stop loss.
The beauty of this lucky indicator is that once it draws a wavy line, prices rarely cross to the opposite side. It can also be used to determine your stop loss, but it is not always a good choice for risk-reward ratios.