The moving averages crossover
Some traders like to wait for the moving averages crossover. Of course, this is a lagging signal, but that is what we want to have. We want confirmation that the correction might be over and it is a good moment to enter the position.
What periods of the moving averages are the best? It is up to you. Some prefer faster MAs (you get a signal earlier, but there is a higher risk that it might be false), whilst others like slower averages.
In the example below there are two simple moving averages: 10 SMA (red) and 20 SMA (blue). The main trend is down, after the correction up to 78%, the price falls back. When the red MA crosses with blue MA, we get our signal to enter a short position.
Cross of the averages as a confirmation signal
Try to use the moving averages of other periods, 10 and 20 are the example here. Test other combinations, such as 5 and 15, 8 and 13, 8 and 21, 20 and 33, or if you want to use slower MAs, check 33 and 55.
Why not simply give you one set of MAs to follow? Because some traders trade on 4-hour and some MAs work better than others there. Other traders prefer 5-minutes chart, and here other MAs may be a better choice. Can you see how many combinations there can be? You have to learn how to choose the best MAs for individual stock, index or currency.