⚠️ Many people enter to buy during the (bounce) thinking it is an upward trend. But the price goes back (drops) again.
And here we must differentiate between:
(Bounce) and (Correction) and (Trend)
🎯 Bounce
It is a temporary movement (against the general trend of the price). Its shape on the chart is still (two candles) or a one-day movement, and it occurs without breaking resistance.
☝️ And quickly..
The meaning of the word (Resistance) is a price area that the currency reaches and it is difficult for the price to continue rising further. The reason is that there is a lot of selling on the currency. This puts pressure on the price and causes it to drop more.
- And there are two types of bounce:
1. Upward Bounce:
The price is dropping and suddenly stops dropping and starts to rise a little.
2. Downward Bounce:
The price is rising and suddenly stops rising and starts to drop a little.
✅ Example:
If a currency dropped from $180 to $145, and then rose to $155 (this is a bounce). But it doesn’t necessarily mean a return to upward movement and recovery of the currency; it might just be a temporary rise before it continues its drop.
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🎯 The Trend
It is the general direction of the price movement. If you zoom out on the chart to see it from afar and notice that:
1. The price is generally rising → this is an upward trend
2. The price is dropping → this is a downward trend
3. No significant rise or drop → Sideways trend (fluctuation)
✅ The trend determines when to start buying or selling.
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🎯 Correction
It is a temporary movement against the general direction (trend), and it is often deeper than a simple bounce. The correction may last for days or weeks, but it does not change the main trend.